Home » Tag: yield on cost

Measuring Progress – Stock Tracker Excel Sheet

TIP Guy 29 September 2009 education, process 6 Comments

monthly-dividend-portfolio-reviewIn an earlier post, I mentioned that I use XIRR as one of the metrics for measuring the individual stocks performance in my portfolio.  In simple terms, XIRR is the interest rate you would need to make the same money from any interest bearing account (with same investments). While XIRR can be extended at portfolio level, in today’s post, I am only discussing how I use XIRR at individual stock level.

I have pulled out one excel sheet [copy is in my toolbox at TIP-Stock-Tracker] as a representative example for this discussion. The primary notion behind this excel sheet is to keep records and track the performance. It is not intended “to model an automated tracker” or “to perform any automated calculation across the board”. Except XIRR, I have used only few basic math formulas like addition, subtraction, divisions, multiplication, and percentages. In order to understand the formula, I suggest to use formula auditing tool bar (which will show arrows to linked cells) to understand the formulas. This excel is segregated into different regions.

Continue reading rest of this article…

Measuring Progress – XIRR as Personal Rate of Return

TIP Guy 26 September 2009 commentary, education, process, strategy No Comments

investingInvestor’s who use long term buy and hold philosophy use varied different ways to manage risk (such as allocation and diversification), monitor their progress, and performance metric. There is no single metric that can be considered as a holy grail of progress monitoring and/or performance measurement. Depending upon what is the objective and what you want to achieve is what will drive that performance metric.


In this context, I use few different monitoring and/or performance metric. Earlier, I have talked about yield on cost as one metric to determine cash flow (or dividends) received from my original investments. YOC is a very good metric to measure the growth of your dividend based cash flow over a period of time. However, it has a drawback. It does not take into account the variability of capital invested. The price of the stock does not remain static. It keeps changing over a period of time.

Continue reading rest of this article…

Dividend Investing – Few Tidbits

TIP Guy 30 August 2009 dividends, education, process No Comments

1133804_sign_success_and_failureIn my last post, I discussed about two important but overlooked aspects about dividend investing. Today, I am discussing few tidbit that I have learnt over the years.

Dividends provide stability in your portfolio: Companies that are generating profitable cash and sharing with shareholders are the ones that do not go bust. Even in down market they give you cash dividends. While your portfolio’s capital values go down, your dividends are positive return to you portfolio. I crave for such a scenario. I position myself to make sure I have enough cash to buy such companies at lower valuations. I see downturn such as early 2009 as an incredible buying opportunity.

Dividends to investors cannot be manipulated: Companies demonstrate profit in their books which fuels the market price. But can you as an investor spend company profits? Profits can be generated from financial engineering, ROC or ROE can be engineering, but cash flow from operations or dividends to shareholders cannot be manipulated. As an investor you need cash to spend, and not company profits. The company you work for gives you cash (and not profit statement). Will you be willing to work for profit statement? Probably not!

Continue reading rest of this article…

Value of Dividends – A commentary on Article by Krishna Kant of ET Bureau

TIP Guy 22 July 2009 commentary 3 Comments

On this blog, I continue discussing about my thoughts about dividend investing using value approach. My interest in dividend investing is driven by my objective of generating increasing cash flow (coupled with long term capital appreciation).

Recently, there was a very good article in the context of disinvestment of PSUs. The author, Krishna Kant, presented a very good perspective about significance of dividends from PSUs and its implications on government’s fiscal needs. I am discussing few take ways from that article:

Continue reading rest of this article…

Compounding Dividend much Better Than Compounding Interest

TIP Guy 24 April 2009 commentary 2 Comments

We all are very much familiar with compound interest. We use savings account with fixed interest. What happens here is that an interest earned (from earlier time period) is added into the principle. Thus the next time period’s interest is somewhat higher. Traditionally, that’s what we have been used to. With a fixed rate of interest our earnings increase year after year.

Let us take an example.

  • We deposit Rs 100 in a savings account with rate of interest of 5%, which gets compounded annually.
  • In the first year, we will earn Rs. 5, in year 2 we get Rs 5.25, in year 3 we get Rs. 5.51, in year 4 we get Rs. 5.79, in year 5 we get Rs 6.08, and it continues.
  • So the interest that we get keeps on increasing year after year.

Now if this is compounding interest, then what is compounding dividends? Before we try to answer this, let me explain what is the good quality dividend stock.

Among many others, the characteristic of good dividend stock is that its dividend increases every year. The rationale here is if earnings increase, the dividend will increase. Even if the percentage remains same, the companies tend to increase dividends with increase in EPS. This is what I call a good dividend stock. Continue reading rest of this article…

Measuring Progress – Yield on Cost or Dividend Yield

TIP Guy 12 March 2009 commentary, dividends, strategy 15 Comments

Individuals need to set a goal in order to succeed at anything, including our individual investments. Logically, the next step is to determine how we are going to measure our progress. In the realm of investments, most the individual investors (if not all investors) look at annualized returns and compare it with benchmark index. Here in India investors either use BSE’s Sensex Index or NSE’s Nifty Index. In addition, based on multiple discussions I have with individual investors, many investors use percentage based capital appreciation or depreciation which is devoid of time concept i.e. no time scale is involved.

For example, investors love to say “I made 150%, 200%, or 2x or 3x, or 0.5x times my money”. I cannot comments whether this progress measurement is right or wrong because I do not know individual’s objective and/or risk profile.

Ironically, of the many folks I have talked to in last ten years, more than 95% of them have always increased their original capital. Well if that’s the case then who is loosing it? If nobody is loosing, then why the market is more than 50% down from its peak. I am digressing from the subject, so coming back to the topic of measuring our progress…… Continue reading rest of this article…



~