Former iPIG Portfolio -- Year End Update -- 2022

From a stock market perspective, 2022 has come and gone, and to say it has been a rough year would be something of an understatement. Fortunately, our household’s financial plan has been built from “experience” (AKA - getting burned enough to know better), and overall, we balanced offense with defense enough to survive.

When it comes to the former iPIG portfolio, it too has a mix of good news and bad news. According to the available preliminary data (final values are subject to change when the account’s December statement publishes), the account finished the year at $109,235.83 , down from the official December 2021 statement value of $124,295.22.

That’s a total return of -12.1%, which is clearly below expectations. Still, the portfolio did well compared to the S&P 500 – as measured by the ETF SPY, with Dividends Reinvested as calculated from Yahoo! Finance. That index tracking ETF turned in a total return of -18.2% with dividends reinvested.

More importantly, the portfolio’s dividend-like income actually increased throughout 2022, and in line with its primary design criteria, it actually beat the official inflation rate as measured by the BLS CPI. The portfolio received $3,030.11 in dividend-like income in 2022, vs. $2,679.81 in 2021, according to the dividend report from the broker that holds the account. That’s an increase of 13.1%, which beats the most recent 12-month CPI report of 7.1%. All that said, the BLS CPI under-stated our household’s cost increases, by a laughable amount. I guess we were just “lucky”…

Looking forward to 2023, I strongly suspect dividend increases will slow a lot for the companies in the portfolio. Companies are feeling the cost pressures, too, and since dividends are voluntary payments, it may be tempting to freeze or only offer token increases while the businesses behind those payments wrestle with their own cost structures.

In the October through December quarter of 2022, the former iPIG portfolio received $793.95 in dividend-like income. Assuming payments hold flat with that level overall, that works out to $3,175.80 for 2023. The good news is that’s a decent 4.8% year-on-year increase just from holding flat. The bad news is that dividends remain voluntary payments, so even that much is not guaranteed.

Put it all together, and 2022 was a very clear example of the former iPIG portfolio delivering to its primary design criteria. In a year when overall market performance – and the portfolio’s balance – was rough, it was very nice to see the account’s income stream buck the trend and finish the year ahead of even a fairly high official inflation rate.

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