This article will be similar to two other articles I wrote last year on dividends and buybacks, and fundamentals, technicals, and insider buying. For this article, I will be using the same process of looking at the holdings of select ETFs and see what stocks are included in each ETF. For this strategy, I will be using three ETFs that cover the following strategies: Low Volatility, Dividend Growth, and Technical Momentum.
For my low volatility ETF selection, I will use the most popular Low Volatility ETF, which is the PowerShares S&P 500 Low Volatility Portfolio ETF (SPLV).
ETF Description: "The Index is compiled, maintained, and calculated by Standard & Poor's and consists of the 100 stocks from the S&P 500® Index with the lowest realized volatility over the past 12 months." [SPLV Fund Page]
For my dividend growth ETF selection, I will use the most popular dividend ETF that focuses on companies growing dividends, which is the Vanguard Dividend Appreciation ETF (VIG).
ETF Description: "Vanguard Dividend Appreciation ETF seeks to track the performance of a benchmark index that measures the investment return of common stocks of companies that have a record of increasing dividends over time." [VIG Fund Page]
For my technical momentum ETF selection, I will use the only ETF that focuses on companies with strong momentum, which is the PowerShares DWA Technical Leaders Portfolio ETF (PDP).
ETF Description: "The Index includes approximately 100 U.S.-listed companies from a broad mid- and large-capitalization universe. The Index is constructed pursuant to Dorsey Wright proprietary methodology, which takes into account, among other factors, the performance of each of the 3,000 largest U.S.-listed companies as compared to a benchmark index, and the relative performance of industry sectors and sub-sectors." [PDP Fund Page]
First, I went to the holdings page for SPLV, and then I copied and pasted the holdings into a spreadsheet. Second, I then went to the holdings page for VIG, and copied and pasted the holdings into the same spreadsheet. Finally, I went to the holdings page for PDP, and copied and pasted the holdings into the spreadsheet. Once I had all the holdings in my spreadsheet, I looked through the holdings for the stocks that were included in all three funds. When looking at the holdings I found only two companies that were included in all three ETFs: J. M. Smucker Company (SJM), and Praxair, Inc. (PX).
Company Descriptions & Historical Data
J. M. Smucker Company:
Company Description: "J. M. Smucker Company is the leading marketer of jams, jellies, preserves, and other fruit spreads in the U.S. They are also the leader in dessert toppings, natural peanut butter, and health and natural foods juice products, and market a wide variety of other specialty products throughout the U.S. and in many foreign countries." [Zacks.com Company Description]
Historical Returns: To see what the historical returns of JM Smucker have been I will use longrundata.com to compare the total returns to the SPDR S&P 500 Trust ETF (SPY). For the last ten-year period, shares of JM Smucker have had an annualized total return of 14.75%. While during the same time, the SPY has had an annualized total return of 8.56%.
Dividend History: Looking at historical dividend data from dividendchannel.com, in the last ten years JM Smucker has increased its dividend from $0.20/share to a current level of $0.52/share. That is an increase of 160% in the dividend in the last ten years, and at no time during the last ten years was the dividend cut. Shares of JM Smucker are currently yielding 2.15%, which is higher than a 10-year treasury bond, but JM Smucker has shown from its history of raising its dividend, that it will continue doing so in the future.
Company Description: "Praxair is one of the largest industrial gases companies in North and South America. Praxair's primary products for its industrial gases business are atmospheric gases and process gases. The company's surface technology segment, operated through Praxair Surface Technologies, Inc., supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders." [Zacks.com Company Description]
Historical Returns: To see what the historical returns of Praxair have been I will use longrundata.com to compare the total returns to the SPDR S&P 500 Trust ETF . For the last ten-year period, shares of Praxair have had an annualized total return of 18.03%. While during the same time, the SPY has had an annualized total return of 8.56%.
Dividend History: Looking at historical dividend data from dividendchannel.com, in the last ten years Praxair has increased its dividend from $0.107/share to a current level of $0.60/share. That is an increase of 460.75% in the dividend in the last ten years, and at no time during the last ten years was the dividend cut. Shares of Praxair are currently yielding 2.12%, not great but still higher than the 10-year treasury bond, but as Praxair has shown in the past, it will continue raising its dividend.
The combination of the three ETFs that I chose provides a great "screen" for strong companies that have a history of dividend growth, lower volatility than the market, and strong price momentum. Since the market is at or near an all-time high, finding stocks with lower volatility I believe is important in case there is a correction from these levels. If there is a correction these two stocks should help you sleep at night knowing that even during the great recession they maintained or raised their dividends, and did not cut them, like other companies did during the great recession.