Life moves quickly. Already this year we have seen uprisings, natural and man-made disasters, tax season has come and gone, and the Royal Wedding was still fresh in our minds until the death of Osama bin Laden stole the headlines. How many of our New Year's resolutions are still intact? The tyranny of the urgent may tempt us to delay and time zips by.
The problem is that we can easily be overwhelmed and shot down. The way to solve this is to focus on what works in the long term, allowing us to filter out what may work in the short term but won't stand the test of time. We continue to examine different portfolios to see what we can learn and use to further our investment portfolios.
Howard Silverblatt at Standard & Poor's noted that the first four months of dividend increases in 2011 have already surpassed total dividend increases for the full year of 2010. The 500 largest firms on Wall Street have increased their payouts by nearly $21 billion so far this year.
Jonas Elmerraji of Stockpickr selected five that have boosted their dividends and we put them into a portfolio to see how they compare against a benchmark set of ETFs.
Exxon Mobil (NYSE:XOM)
PPG Industries (NYSE:PPG)
Wells Fargo (NYSE:WFC),
We entered these funds into our system and then compared it with a balanced portfolio of Dividend producing ETFs.
|Asset||Fund in this portfolio|
|REAL ESTATE||(NYSEARCA:ICF) iShares Cohen & Steers Realty Majors|
|FIXED INCOME||(NYSEARCA:TIP) iShares Barclays TIPS Bond|
|Emerging Market||(NYSEARCA:VWO) Vanguard Emerging Markets Stock ETF|
|US EQUITY||(NYSEARCA:DVY) iShares Dow Jones Select Dividend Index|
|US EQUITY||(NYSEARCA:VIG) Vanguard Dividend Appreciation ETF|
|INTERNATIONAL EQUITY||(NYSEARCA:IDV) iShares Dow Jones Intl Select Div Idx|
|High Yield Bond||(NYSEARCA:HYG) iShares iBoxx $ High Yield Corporate Bd|
|INTERNATIONAL BONDS||(NYSEARCA:EMB) iShares JPMorgan USD Emerg Markets Bond|
- The Street's 5 Dividend Stocks Rewarding Shareholders -- Total of $10K invested equally in each stock
- Retirement Income ETFs Tactical Asset Allocation Moderate -- Above funds using TAA (40% fixed income, 30% for each of the top two asset classes)
- Retirement Income ETFs Strategic Asset Allocation Moderate -- Above funds using SAA (40% fixed income, 12% for each of the five asset classes -- funds selected based on price momentum)
|Portfolio/Fund Name||1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|P Street 5 Dividend Stocks Rewarding Shareholders||24%||137%||4%||13%||5%||15%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||18%||158%||3%||13%||5%||21%|
|Retirement Income ETFs Tactical Asset Allocation Moderate||12%||100%||9%||73%||9%||64%|
The more detailed analysis and graphs show the volatility of the stock portfolio, which has performed well in the short term but not in the longer term.
Even as we review the one year returns, which is where the portfolio leads, the Sharpe index is lower than the SAA moderate portfolio so you are having to manage risk with this portfolio.
These stocks may be increasing their dividends, but they don't appear to be a good choice for those who want to manage both risk and returns.
We will keep looking to see if there are better choices of stocks that offer better risk adjusted returns.
Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.