The Motley Fool

How to Generate Meaningful Returns for Your Stock Portfolio

Contrary to popular belief, you don’t need to be a rocket scientist to manage your own stock portfolio, nor do you need to hit a home run every time to generate meaningful returns. All you need is the will to learn, to apply what you learn, and to reflect on your actions.

Learning

Hopefully, you did some reading or attended some investment seminars before investing in the stock market.

Thanks to the invention of the internet and the popularity of smartphones and tablets, it’s easy for anyone to learn how to invest if they have the heart to do so. You can pretty much access the Motley Fool or any information you need about investing anywhere, anytime.

stock market, money, invest 16-9

Applying

From the reading I’ve done, I know you can’t do poorly by focusing on building a portfolio of quality dividend stocks which are fairly priced or discounted at the time of purchase.

I think Alimentation Couche Tard Inc. (TSX:ATD.B) is a quality dividend company. It has a strong track record of outstanding performance.

In the last five years, it delivered 500%, which equates to annualized returns of 44%. This is thanks to Couche Tard’s double-digit earnings-per-share growth in that period and the expansion of its price-to-earnings ratio.

The company’s strong returns are attributable to it being an excellent capital allocator. Since 2007, Couche Tard has earned a return on equity in the double-digit percentages, and that has only increased to 20% or higher since 2010.

With the most recent acquisition of CST Brands and the integration that follows, for the next few years, investors can expect Couche Tard to maintain a high return on equity, which will translate to higher profits.

Couche Tard’s strong growth has also allowed it to grow its dividend at a sky-high annualized rate of 30% for the last five years.

Reflecting

I keep a record of every trade I make. Every time I buy a stock, I write a summary of why I like the company and how much the company is worth on a per-share basis based on my analysis. This forms the basis of the target price range for my purchase, which I will update over time.

If I sold a stock and immediately used the proceeds to buy another stock, I also make note of that, so that I can refer to it in the future to see if I made the right decision.

I also write on other websites and interact with other investors as a part of the process of learning, applying, and reflecting.

The takeaway

Last year, dividends added about 3% to my total returns. I also took some profits and losses and have unrealized gains and losses. Despite these losses, my stock portfolio still came out almost 17% higher without accounting for the contributions I made.

This goes to show that you don’t have to make the best decisions to generate a decent and meaningful return for your stock portfolio.

You only need to make good decisions most of the time. As long as you win more than you lose, your net worth will still go higher over time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of ALIMENTATION COUCHE TARD INC. ALIMENTATION COUCHE TARD is a recommendation of Stock Advisor Canada.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.