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I recently read an excellent article by Tim McAleenan Jr. in which he discussed how "dead money" isn't really dead if you buy dividend growth stocks. He highlighted some stocks which have had very small capital appreciation over the past 5 years, but when you include the dividends that you were paid the returns were actually fairly decent. It made me think about "The Lost Decade" of 2000-2010 in which the market as a whole basically went nowhere. On January 3, 2000, the S&P opened at 1,469.25. On December 31st, 2010, the S&P closed at 1257.64. That is a drop of 14.4% over ten years. If we extend this "decade" through 2012 we still have not gotten back to where we were at the beginning of 2000. Monday, at 1,426.66, we are still down 2.89%. This has led many "experts" to declare that "Buy and Hold is Dead!" But is it really? Was 2000-2012 really a "lost decade"? Not if you were a dividend investor.

Let's look at the SPDR ETFs for the S&P 500 (NYSEARCA:SPY) and for the Dow Jones Industrial Average (NYSEARCA:DIA). Both of these track their respective indices, but they also both pay a dividend. This will allow us to see how these dividends affected the returns. If we look at's adjusted prices, which take into account dividends and stock splits, SPY closed at $115.94 on December 31st 1999, and closed Monday at $142.35. This is a gain of 22.78%. Far different then the loss of 14.4% for the actual S&P 500. When we look at DIA we see that the adjusted price on December 31st, 1999 was $86.58. Today it closed at $130.97. That is a gain of 51.27%. Hardly a lost decade. Although neither showed spectacular returns, at least it's better then having no return at all.

So why did DIA return 51% and SPY only returned 22%? I would argue that it is because all of the component companies of DIA pay a dividend, whereas SPY is made up of many companies which pay no dividend at all. Since January 2000,F DIA has paid out a total of $30.695/share in dividends. Based on the actual purchase price of $115.19, this translates into a dividend return of 26.65% over the twelve years. SPY has paid out $28.34/shares since 2000, and with an initial price of $146.88 this translates into a dividend return of 19.29%. This may explain why DIA's overall return has been much better then SPY's.

But now let's turn to individual stocks. I wanted to see how a dividend growth investor would have done during this "lost decade". Using David Fish's CCC list I looked for all stocks that have increased their dividend for the past 22 years. This would mean that in the year 2000, when the "lost decade" started, they would have already been increasing their dividends for at least 10 years and would have been suitable for a DG investor to consider buying (for ease of the study I left out other criteria such as dividend growth rate and yield). I know that due to survivorship bias I can't know all the stocks which met the buy criteria in 2000, and have since fallen off the CCC list, but I do know that if a stock cuts its dividend I sell it immediately, so It wouldn't still be in the portfolio today anyway. It's not a perfect test, but I think it works well enough.

There were 110 stocks on the CCC list that have increased their dividend for 22 years or more. Using the adjusted closing prices from I calculated the return for each stock since 2000. Here are the results:

1st Source Corp. (NASDAQ:SRCE)$14.99$22.1647.83%
3M Company (NYSE:MMM)$35.86$93.02159.40%
Abbott Laboratories (NYSE:ABT)$45.03$66.0546.68%
ABM Industries Inc. (NYSE:ABM)$7.44$20.29172.72%
AFLAC Inc. (NYSE:AFL)$19.2$53.78180.10%
Air Products & Chem. (NYSE:APD)$25.24$85.26237.80%
Altria Group Inc. (NYSE:MO)$2.65$32.391122.26%
American States Water (NYSE:AWR)$15.89$47.34197.92%
Archer Daniels Midland (NYSE:ADM)$8.72$27.78218.58%
AT&T Inc. (NYSE:T)$26.62$33.7426.75%
Atmos Energy (NYSE:ATO)$10.91$35.78227.96%
Automatic Data Proc. (NASDAQ:ADP)$37.44$57.5853.79%
Becton Dickinson & Co. (NYSE:BDX)$21.98$78.53257.28%
Bemis Company (NYSE:BMS)$12.02$33.45178.29%
Black Hills Corp. (NYSE:BKH)$12.78$36.26183.72%
Bowl America Class A (NYSEMKT:BWL.A)$3.33$12260.36%
Brady Corp. (NYSE:BRC)$12.8$33.04158.13%
Brown-Forman Class B (BF-B)$11.01$63.5476.75%
C.R. Bard Inc. (NYSE:BCR)$23.04$98.18326.13%
California Water Service (NYSE:CWT)$9.47$18.1591.66%
Carlisle Companies (NYSE:CSL)$14.29$58.87311.97%
Chevron Corp. (NYSE:CVX)$28.21$108.63285.08%
Chubb Corp. (NYSE:CB)$20.64$75.49265.75%
Cincinnati Financial (NASDAQ:CINF)$17.49$39.93128.30%
Cintas Corp. (NASDAQ:CTAS)$30.01$41.4638.15%
Clarcor Inc. (NYSE:CLC)$7.57$46.61515.72%
Clorox Company (NYSE:CLX)$36.04$73.63104.30%
Coca-Cola Company (NYSE:KO)$21.32$36.7872.51%
Colgate-Palmolive Co. (NYSE:CL)$50.04$106.03111.89%
Commerce Bancshares (NASDAQ:CBSH)$13.9$35.86157.99%
Community Trust Banc. (NASDAQ:CTBI)$8.3$31.96285.06%
Computer Services Inc. (OTCQX:CSVI)$6.24$29.6374.36%
Conn. Water Service (NASDAQ:CTWS)$13.5$30.26124.15%
Consolidated Edison (NYSE:ED)$17.4$56.05222.13%
Diebold Inc. (NYSE:DBD)$16.99$30.6180.16%
Donaldson Company (NYSE:DCI)$5.27$33.08527.70%
Dover Corp. (NYSE:DOV)$35.67$64.9282.00%
Eaton Vance Corp. (NYSE:EV)$7.35$32.53342.59%
Emerson Electric (NYSE:EMR)$19.94$53.18166.70%
Energen Corp. (NYSE:EGN)$7.24$44.53515.06%
Erie Indemnity Company (NASDAQ:ERIE)$21.61$67.87214.07%
(Exxon Mobil) (XOM)$30.06$86.92189.16%
Family Dollar Stores (NYSE:FDO)$13.6$63.04363.53%
Federal Realty Inv. Trust (NYSE:FRT)$10.34$104.21907.83%
First Financial Corp. (NASDAQ:THFF)$14.26$30.47113.67%
Franklin Resources (NYSE:BEN)$26.88$128.41377.72%
Genuine Parts Co. (NYSE:GPC)$15.3$64318.30%
Gorman-Rupp Company (NYSEMKT:GRC)$5.43$29.38441.07%
H.B. Fuller Company (NYSE:FUL)$11.53$34.21196.70%
HCP Inc. (NYSE:HCP)$4.92$45.12817.07%
Helmerich & Payne Inc. (NYSE:HP)$7.21$56.43682.66%
Hormel Foods Corp. (NYSE:HRL)$7.99$31.33292.12%
Illinois Tool Works (NYSE:ITW)$26.08$61.39135.39%
Johnson & Johnson (NYSE:JNJ)$34.05$70.63107.43%
Kimberly-Clark Corp. (NYSE:KMB)$42.78$84.0596.47%
Lancaster Colony Corp. (NASDAQ:LANC)$22.55$68.61204.26%
Leggett & Platt Inc. (NYSE:LEG)$13.37$26.83100.67%
Lowe's Companies (NYSE:LOW)$13.21$35.11165.78%
McCormick & Co. (NYSE:MKC)$11.26$64.24470.52%
McDonald's Corp. (NYSE:MCD)$30.18$90.18198.81%
McGraw-Hill Companies (MHP)$23.78$54.04127.25%
MDU Resources (NYSE:MDU)$6.05$21.42254.05%
Medtronic Inc. (NYSE:MDT)$30.83$41.735.26%
Mercury General Corp. (NYSE:MCY)$12.89$40.41213.50%
MGE Energy Inc. (NASDAQ:MGEE)$11.09$51.37363.21%
Middlesex Water Co. (NASDAQ:MSEX)$9.76$19.2697.34%
Mine Safety Appliances (NYSE:MSA)$4.89$41.51748.88%
NACCO Industries (NYSE:NC)$12.27$59.72386.72%
National Fuel Gas (NYSE:NFG)$14.77$52.77257.28%
National Retail Properties (NYSE:NNN)$3.76$31.26731.38%
Nordson Corp. (NASDAQ:NDSN)$9.65$62.3545.60%
Northwest Natural Gas (NYSE:NWN)$12.66$44.43250.95%
Nucor Corp. (NYSE:NUE)$9.87$43.52340.93%
Old Republic Int'l (NYSE:ORI)$4.04$10.54160.89%
Parker-Hannifin Corp. (NYSE:PH)$27.68$86.21211.45%
Pentair Ltd. (NYSE:PNR)$14.73$48.23227.43%
PepsiCo Inc. (NYSE:PEP)$26.7$69.63160.79%
Piedmont Natural Gas (NYSE:PNY)$8.74$31.88264.76%
Pitney Bowes Inc. (NYSE:PBI)$26.86$10.69-60.20%
PPG Industries Inc. (NYSE:PPG)$41.3$133.26222.66%
Procter & Gamble Co. (NYSE:PG)$39.95$69.3473.57%
Questar Corp. (NYSE:STR)$1.79$19.71000.56%
Raven Industries (NASDAQ:RAVN)$0.86$26.322960.47%
RLI Corp. (NYSE:RLI)$10.53$64.71514.53%
RPM International Inc. (NYSE:RPM)$5.94$29.3393.27%
Sherwin-Williams Co. (NYSE:SHW)$15.96$152.76857.14%
Sigma-Aldrich Corp. (NASDAQ:SIAL)$13.1$73.7462.60%
SJW Corp. (NYSE:SJW)$14.16$25.580.08%
Sonoco Products Co. (NYSE:SON)$14.24$29.83109.48%
Stanley Black & Decker (NYSE:SWK)$20.86$73.95254.51%
Stepan Company (NYSE:SCL)$8.42$54.02541.57%
Sysco Corp. (NYSE:SYY)$14.6$31.99119.11%
T. Rowe Price Group (NASDAQ:TROW)$14.5$65.9354.48%
Target Corp. (NYSE:TGT)$31.67$61.5294.25%
Telephone & Data Sys. (NYSEMKT:TDS.S)$54.59$23.61-56.75%
Tennant Company (NYSE:TNC)$12.62$42.85239.54%
Tompkins Financial Corp. (NYSEMKT:TMP)$8.92$40.4352.91%
Tootsie Roll Industries (NYSE:TR)$21.02$26.5826.45%
UGI Corp. (NYSE:UGI)$4.12$32.79695.87%
United Bankshares Inc. (NASDAQ:UBSI)$14.28$24.168.77%
Universal Corp. (NYSE:UVV)$13.39$50.37276.18%
Universal Health Realty Trust (NYSE:UHT)$5.66$49.48774.20%
Valspar Corp. (NYSE:VAL)$16.42$62.23278.99%
Vectren Corp. (NYSE:VVC)$9.43$30.06218.77%
VF Corp. (NYSE:VFC)$20.83$150.1620.60%
W.W. Grainger Inc. (NYSE:GWW)$38.37$200421.24%
Wal-Mart Stores Inc. (NYSE:WMT)$57.12$68.6520.19%
Walgreen Company (WAG)$25.41$36.3142.90%
Weyco Group Inc. (NASDAQ:WEYS)$6.69$23.38249.48%
WGL Holdings Inc. (NYSE:WGL)$15.32$39.63158.68%

The average return of all of the stocks was 304.3%. The median was 227%. Out of all 110 stocks only two had a negative return. Pitney Bowes was down 60.2%, and Telephone and Data Systems was down 56.75%. This is even after taking dividends into account. The highest return was for Raven Industries which returned 2960%! 18 stock had returns of over 500%.

To me this is clear evidence (not proof, but evidence) that a dividend growth investing strategy can succeed even in the most difficult periods, such as we have seen since 2000. Even though the market as a whole has gone nowhere, a well diversified portfolio of dividend growth stocks, with dividend reinvesting, should have done well.

Thank you for reading my article. I welcome your comments.

Disclosure: I am long AFL, APD, MCD, EMR, PEP, ITW, CINF, SYY, JNJ, TGT, PG, ADP, MDT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.