Dividend Achievers: How Have They Performed?

by: New Low Observer
On October 9, 2009, I created a list of ten Dividend Achievers that I felt were the best investments at the time. After having passed the 1 month period, I feel that it is necessary to review the performance of the stocks that were on that list. As with the original article I will show the performance based on those that were ranked from 1st to 10th (chart).
  1. Wal-Mart (NYSE:WMT) up 6.46%
  2. Cardinal Health (NYSE:CAH) up 14.43%
  3. Weyco (NASDAQ:WEYS) down 0.8%
  4. Bard Inc. (NYSE:BCR) up 3.62%
  5. Northwest Natural Gas (NYSE:NWN) up 1.01%
  6. Piedmont Natural Gas (NYSE:PNY) down 3.67%
  7. Becton Dickinson (NYSE:BDX) up 5.77%
  8. McCormick & Co. (NYSE:MKC) up 6.71%
  9. Abbott Laboratories (NYSE:ABT) up 5.73%
  10. ExxonMobil (NYSE:XOM) up 4.62%

As an investor, I believe that the performance of these stocks need to be put in perspective. There are three tiers that I like to categorize my investments:

  1. As compared to the historical CAGR of the stock market
  2. As compared to the gains in a single month
  3. As compared to if the money was in government guaranteed alternatives

In Category 1, I have calculated the 100 year compound annual growth rate for the S & P 500 (this is being generous) at 11.57% (Jan. 1, 1908 to Dec. 31, 2008). To me, any investment return greater than 11.57% in less than a year is considered as a sell candidate.

Category 2 is wholly dependent on Category 1. If the gain of a stock has exceeded, in one month, more than half what could have been received based on the historical return of the stock market then I need to consider selling the stock.

Category 3 tells me whether or not I'm doing, at least, better than the alternative guaranteed sources. If I can't beat the government protected sources then I need to re-evaluate the investment position. For the stocks that have lost money so far (WEYS and PNY) the dividend payments allow the investor to wait for a reversal of the declining trend. WEYS has a dividend yield of 2.60% while PNY has a dividend yield of 4.70%. Both instances provide the ability to compete against government guaranteed alternatives over the coming eleven months.

Based on the aforementioned thoughts, I would recommend that all of the stocks (except WEYS, NWN, and PNY) be sold at the earliest opportunity. For anyone to claim that a stock, which has gained 3 percent in a month, could continue the same trajectory over the next 11 months is going to be highly disappointed. Below is the hypothetical annual return if the past month were to continue at the same rate until October 9, 2010:

  1. WMT up 77.52%
  2. CAH up 173.16%
  3. BCR up 43.44%
  4. NWN up 12.12%
  5. BDX up 69.24%
  6. MKC up 80.52%
  7. ABT up 68.76%
  8. XOM up 55.44%

Only one of the above stocks has the ability to fulfill the projections with ease and that is Northwest Natural Gas. Suffice to say, all NWN needs to do is go up 7.32% and combined with the dividend of 3.8% you have achieved the 12.12% annual return. If we exclude the dividend, then NWN would have to rise 11.11%. In either case, NWN has the highest probability of continuing the current trajectory.

Keep in mind that I tend to invest 100% of my portfolio in 5 companies at the most. Truth be told, I have been invested in 2 or 3 stocks since December 2008. This means 33% to 50% in one stock at a time. Obviously, my approach isn't for everyone however it is worth your time to critically examine the approach that I employ.

Disclosure: Long NWN.