How to do quantitative analysis of portfolio?

First let us quickly find out total portfolio value we know the number of stocks and price of each stock, we can multiple number of stocks with price of each stock and then sum up –

Type of Investment	Company Name	Stock Symbol	Portfolio Position (# of shares)	Current Market Price	Current Market Value
Common stock	Altria	MO	119	50.20	5,973.80
Common stock	AT&T	T	173	32.65	5,648.45
Common stock	Chevron	CVX	26	104.98	2,729.48
Common stock	Coca Cola	KO	59	40.55	2,392.45
Common stock	Duke Energy	DUK	65	76.78	4,990.70
Common stock	Johnson & Johnson	JNJ	31	100.60	3,118.60
Common stock	McDonalds	MCD	52	97.44	5,066.88
Common stock	Pepsi Cola	PEP	17	95.62	1,625.54
Common stock	Philip Morris Intl	PM	70	75.33	5,273.10
Common stock	Proctor & Gamble	PG	52	81.94	4,260.88
				Total Portfolio Market Value	41,079.88

First we need to multiply number of stocks with portfolio position or number of stocks. Then I added current market value of each company name to get total portfolio value.

 

 

 

Calculate individual yields 

Now we know Current market value of each company in the portfolio and we know estimated dividend income from each company. So for example dividend yield for Altria would be –

Estimated Dividend / Current Market Value = 247/5973.80*100 = 4.13%

And I applied the same method to calculate estimated current yield for each company we have in the portfolio. 

Company Name	Stock Symbol	Portfolio Position (# of shares)	Current Market Price	Current Market Value	Estimated Dividend/Interest	Estimated Current Yield
Altria	MO	119	50.20	5,973.80	$247.00	4.13%
AT&T	T	173	32.65	5,648.45	$325.00	5.75%
Chevron	CVX	26	104.98	2,729.48	$111.00	4.07%
Coca Cola	KO	59	40.55	2,392.45	$77.00	3.22%
Duke Energy	DUK	65	76.78	4,990.70	$206.00	4.13%
Johnson & Johnson	JNJ	31	100.60	3,118.60	$86.00	2.76%
McDonalds	MCD	52	97.44	5,066.88	$176.00	3.47%
Pepsi Cola	PEP	17	95.62	1,625.54	$44.00	2.71%
Philip Morris Intl	PM	70	75.33	5,273.10	$280.00	5.31%
Proctor & Gamble	PG	52	81.94	4,260.88	$133.00	3.12%

 

 

Weighted average factor and the weighted average yields 

We determine weighted average factor for each stock by dividing the current market value with total market portfolio value. For example, for Altria or stock symbol MO Current Market Value / Total Market Portfolio Value = 5973.80/41079.88 = .15 and did the same exact thing for each stock to find out the weight then have in portfolio(Weighted Average, n.d.).

Stock Symbol	Portfolio Position (# of shares)	Current Market Price	Current Market Value	Estimated Dividend/Interest	Estimated Current Yield	Weighted Average Factor	Weighted Average Yield
MO	119	50.20	5,973.80	$247.00	4.13%	0.15	0.60%
T	173	32.65	5,648.45	$325.00	5.75%	0.14	0.79%
CVX	26	104.98	2,729.48	$111.00	4.07%	0.07	0.27%
KO	59	40.55	2,392.45	$77.00	3.22%	0.06	0.19%
DUK	65	76.78	4,990.70	$206.00	4.13%	0.12	0.50%
JNJ	31	100.60	3,118.60	$86.00	2.76%	0.08	0.21%
MCD	52	97.44	5,066.88	$176.00	3.47%	0.12	0.43%
PEP	17	95.62	1,625.54	$44.00	2.71%	0.04	0.11%
PM	70	75.33	5,273.10	$280.00	5.31%	0.13	0.68%
PG	52	81.94	4,260.88	$133.00	3.12%	0.10	0.32%
						1.00
		Total Portfolio Market Value	41,079.88
						Weighte Averatge Yield:	4.10%

To calculate weighted average yield, we just have to calculate weighted average yield for each stock. We already have calculated weighted average factor for each stock, and we have current yield for each stock. I have multiplied estimated current yield with weighted average factor to get weighted average yield for that stock.

The market value of each stock is different in the portfolio and that is why we have to determine the average weight of each stock in the portfolio. And we have estimated yield for each stock, so we just multiply the estimated yield with the average weight factor to get weighted average yield.

            Price of stock goes up and down. And yield can vary every day. For example say you purchase just 1 stock of ABC Company for $100. This company pays yearly dividend worth $2, so the dividend yield of the stock would be 2%. This yield is based at cost.

            After purchasing the stock, say after 1 month the stock price increased to $120, but that dividend is still $2, so based on current market price the dividend yield would be 1.67%.

            Next month the stock price drops to $80, at current market price the yield would be 2.5%. Yield at cost remains same until the stock is sold, because right now the purchase cost is still $100 and the yield is still $2, although the market value is changing and based on changing market value the yield is also changing.

My observation is my friend has common stocks in portfolio, these are not bonds or preferred stocks, so the dividend payments are not promised, on positive side those can go up but those might go down too, and even stop based on the financial results of company. So my friend should not consider the dividend income from the portfolio as fixed income for life. This income can go up or down in future, while common stocks bear greater risk than bonds or preferred stocks (Common Stock, n.d.). Based on all these observations, my recommendation would be based on my friends age and investment horizon, if he is young, has a regular full time job with minimum to no dependency on this dividend income , then he can stay invested, but if he wants to cash out sooner or have a regular source of income, maybe he should sell some shares, book profit and switch to bonds with regular coupon payouts.

References:

Retrieved on 5/9/2018. Retrieve from http://www.financeformulas.net/Weighted_Average.html

Retrieved on 5/9/2018. Retrieved from https://www.investopedia.com/terms/c/commonstock.asp