Dividend Achievers: How Have They Performed? 13 comments
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- Wal-Mart (WMT) up 6.46%
- Cardinal Health (CAH) up 14.43%
- Weyco (WEYS) down 0.8%
- Bard Inc. (BCR) up 3.62%
- Northwest Natural Gas (NWN) up 1.01%
- Piedmont Natural Gas (PNY) down 3.67%
- Becton Dickinson (BDX) up 5.77%
- McCormick & Co. (MKC) up 6.71%
- Abbott Laboratories (ABT) up 5.73%
- ExxonMobil (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:
- As compared to the historical CAGR of the stock market
- As compared to the gains in a single month
- 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:
- WMT up 77.52%
- CAH up 173.16%
- BCR up 43.44%
- NWN up 12.12%
- BDX up 69.24%
- MKC up 80.52%
- ABT up 68.76%
- 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.
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This article has 13 comments:
Last march was the greatest time to be an investor
The March 10 recommendation of Helmerich and Payne (HP) was at $22.55. Today the stock is at $37.86. Although I made recommendations to sell the stock with gains of 15%, those who have held the stock have gained 67%. I personally do not care to achieve the 67% with only 3% of my portfolio. Instead, I would rather have 50% of my portfolio taking advantage of the 15% move.
If you do the math, the smaller percentage change with half of the portfolio far exceeds the larger percentage move with only a small portion of the portfolio. In fact, with a portfolio of $10,000, 3% invested only contributes $201 with a return of 67%. Whereas, 50% invested contributes $500 with a return of 10%.
Although I have bought the stock and sold the stock, the general point is that these conservative stocks (Dividend Achievers) can generate the performance which you would expect in a growth stock.
I have not, and will not say that you are wrong - but your way of doing things will not work for everyone, just as mine will not work for everyone. We will agree to disagree about this.
I do agree, however, that the Dividend Achievers list and others like it, are a great place to start your search for a fine stock and you can get wonderful performance over time from those lists.
On Nov 15 05:30 PM Dividend Inc wrote:
> On March 10 and March 20 I wrote two important articles, the March
> 10 article recommended a specific stock while the March 20 article
> indicated that, based on several barometers, the market was on a
> path upwards.
>
> The March 10 recommendation of Helmerich and Payne (HP) was at $22.55.
> Today the stock is at $37.86. Although I made recommendations to
> sell the stock with gains of 15%, those who have held the stock have
> gained 67%. I personally do not care to achieve the 67% with only
> 3% of my portfolio. Instead, I would rather have 50% of my portfolio
> taking advantage of the 15% move.
>
> If you do the math, the smaller percentage change with half of the
> portfolio far exceeds the larger percentage move with only a small
> portion of the portfolio. In fact, with a portfolio of $10,000, 3%
> invested only contributes $201 with a return of 67%. Whereas, 50%
> invested contributes $500 with a return of 10%.
>
> Although I have bought the stock and sold the stock, the general
> point is that these conservative stocks (Dividend Achievers) can
> generate the performance which you would expect in a growth stock.
Also, in my dividend investing, I'm more interested in the long-term increase in the dividend flow (and therefore in the long-term increase in my yield on cost) than I am interested in the price at any given moment. There are exceptions, of course, but price gains don't excite me much and price drops don't discourage me much...as long as the dividend keeps increasing. Over time, and especially with re-investing, that will be the primary source of overall performance.
That said, I also agree that there are different ways to invest successfully. Just having a sensible strategy and sticking to it are the most important things.
A quick trigger finger and day trading are the surest roads to the poorhouse I can think of.
On Nov 16 10:26 AM jayb wrote:
> this is a pointless article. one month's annualized performance
> tells almost nothing. what substantiates that this is a valid strategy?
> there is just as much logic to selling after, say, a .5% gain in
> one day.
Your contribution to my articles is quite valuable and highly appreciated.
My only reason for injecting the word sell at all is because the word never comes up from the institutional side. 97% of all stock recommendations are buy or hold. Sell considerations are only put in place 3% of the time regardless of the market conditions.
Personally, I'm a believer in the approach that you espouse. However, if the word sell is never uttered then we're left with impression that you shouldn't think about your investments after you have bought them.
I take the risk of being called a market timer and/or a speculator (dirty words in market parlance) to keep those who are uninitiated on their toes. Since buy and hold is entrenched as the standard by which all good investment strategy is measured by, I wouldn't be overturning the apple cart by advocating the selling of stocks.
However, it should be noted that if investors understood that above and below mean returns require some action, either selling or buying, there would be a lot more successful investors out there. I have witnessed too many invest-and-forget investors who ended up getting gutted on stocks that had provided exceptional above mean returns.
Judging from your comments Mr. Van Knapp, I am in total agreement with your well-founded, scientifically immutable law of compounding of dividends for long term wealth. However, playing the devil's advocate without harming the portfolio is necessary for novice investors as well as seasoned "pros" to think while they do. Otherwise, complacency will kick in and the above mean gains will turn into market beating losses.
Respectfully,
Touc
On Nov 16 12:07 PM Dividend Inc wrote:
> Greetings Van Knapp,
>
> Your contribution to my articles is quite valuable and highly appreciated.
>
>
> My only reason for injecting the word sell at all is because the
> word never comes up from the institutional side. 97% of all stock
> recommendations are buy or hold. Sell considerations are only put
> in place 3% of the time regardless of the market conditions.
>
> Personally, I'm a believer in the approach that you espouse. However,
> if the word sell is never uttered then we're left with impression
> that you shouldn't think about your investments after you have bought
> them.
>
> I take the risk of being called a market timer and/or a speculator
> (dirty words in market parlance) to keep those who are uninitiated
> on their toes. Since buy and hold is entrenched as the standard
> by which all good investment strategy is measured by, I wouldn't
> be overturning the apple cart by advocating the selling of stocks.
>
>
> However, it should be noted that if investors understood that above
> and below mean returns require some action, either selling or buying,
> there would be a lot more successful investors out there. I have
> witnessed too many invest-and-forget investors who ended up getting
> gutted on stocks that had provided exceptional above mean returns.
>
>
> Judging from your comments Mr. Van Knapp, I am in total agreement
> with your well-founded, scientifically immutable law of compounding
> of dividends for long term wealth. However, playing the devil's
> advocate without harming the portfolio is necessary for novice investors
> as well as seasoned "pros" to think while they do. Otherwise, complacency
> will kick in and the above mean gains will turn into market beating
> losses.
>
> Respectfully,
>
> Touc
On Nov 15 05:30 PM Dividend Inc wrote:
> On March 10 and March 20 I wrote two important articles, the March
> 10 article recommended a specific stock while the March 20 article
> indicated that, based on several barometers, the market was on a
> path upwards.
>
> The March 10 recommendation of Helmerich and Payne (HP) was at $22.55.
> Today the stock is at $37.86. Although I made recommendations to
> sell the stock with gains of 15%, those who have held the stock have
> gained 67%. I personally do not care to achieve the 67% with only
> 3% of my portfolio. Instead, I would rather have 50% of my portfolio
> taking advantage of the 15% move.
>
> If you do the math, the smaller percentage change with half of the
> portfolio far exceeds the larger percentage move with only a small
> portion of the portfolio. In fact, with a portfolio of $10,000, 3%
> invested only contributes $201 with a return of 67%. Whereas, 50%
> invested contributes $500 with a return of 10%.
>
> Although I have bought the stock and sold the stock, the general
> point is that these conservative stocks (Dividend Achievers) can
> generate the performance which you would expect in a growth stock.
This article was pointless. There are so many problems with your approach to investing that you represent in this comment, that I don't know where to start. How can you be a dividend investor and be so concerned with one months performance? How can you be a dividend investor and sell a stock immediately after it goes up just 15% in a short time.
You made a buy recommendation in march, and its up 67%. BUT, you sold after 15%, so why are you taking credit for the stocks run. Also, you could of recommended any stock in march and it would be up big.
You say, "I personally do not care to achieve the 67% with only 3% of my portfolio. Instead, I would rather have 50% of my portfolio taking advantage of the 15% move."
I may be interpreting this comment wrong, but are you saying you would put 50% of your portfolio in one stock and sell after 15% gains. If that is what you are saying then, jeez. Thats not a great strategy imo. I'm all for a concentrated stock portfolio, but thats a bit excessive.
You cannot be a dividend investor and be so short term minded (focusing on one months performance, selling after lilliputian gains). How will you ever actually capture a dividend if you just sell after your stock goes up a little bit.
You also said that these dividend achievers can generate the performance of growth stocks. I disagree with this completely. High yielding dividend stocks that have been paying them for many years don't move as much as growth stocks. Although there are of course exceptions. I will use Your example of the stock you said to buy (and then sell) in march. Its up 67%, but the markets up almost 60%! I can name a couple dozen of growth stocks off the top of my head that are up 100%, 200%, 300%, or more since march.
Just my 2 cents
My wife & I were talking about the investing that we should have done long ago but didn't. So we picked the date when she first had some available money (1984) and asked what single "obvious" stock should have a person have bought then?
I like dividend achievers, so my list of obvious stocks was: XOM, KO, PEP, MCD, MO, & PG. Later I used the Yahoo "Historical" price tables with adjusments for dividends reinvested.
The top gain factors I got were: MO at 96X; PEP at 54X; KO at 46X; XOM at 38X; and MCD at 36X. I'm not confident of the MO number given the impact of all of the acquisitions and spinoffs. But I was mightly impressed by Pepsi's number, even though I don't expect it to be hitting on all 12 cylinders going forward.
PS: PEP, KO, and MCD all have had sizeable dividend increases in the last year. (I am long the three.)
Your point is 100% on topic. In fact, your cursory analysis was proven in Jeremy Siegel's Nifty Fifty Revisited (www.jeremysiegel.com/i...)
Furthermore, the article echo's your analysis on MO, which for some has meant early retirement. MO has really been that good. I hope you get to benefit further from you matter of fact approach to viewing stock investing.
Regards,
Touc
On Nov 17 02:29 PM THofler wrote:
> A slightly off topic comment:
>
> My wife & I were talking about the investing that we should have
> done long ago but didn't. So we picked the date when she first had
> some available money (1984) and asked what single "obvious" stock
> should have a person have bought then?
>
> I like dividend achievers, so my list of obvious stocks was: XOM,
> KO, PEP, MCD, MO, & PG. Later I used the Yahoo "Historical"
> price tables with adjusments for dividends reinvested.
>
> The top gain factors I got were: MO at 96X; PEP at 54X; KO at 46X;
> XOM at 38X; and MCD at 36X. I'm not confident of the MO number given
> the impact of all of the acquisitions and spinoffs. But I was mightly
> impressed by Pepsi's number, even though I don't expect it to be
> hitting on all 12 cylinders going forward.
>
> PS: PEP, KO, and MCD all have had sizeable dividend increases in
> the last year. (I am long the three.)