There are so many different stock ideas and portfolios being recommended 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.
Jake Lynch of TheStreet compared the pessimism of Pimco and Ken Fisher in terms of whether there is a strong future for stocks. He concluded that the case for stocks is compelling, given the low yields offered by bonds and the government's commitment to accelerate economic growth. Among the cheapest stocks in the U.S. market are Dow components, which offer clean balance sheets, powerful brands and emerging-markets exposure.
We are going to do a countdown of the bottom 20 and the top 10 Dow dividend stocks and compare them with a dividend ETF portfolio.
The bottom 10 according to this report are:
- Travelers (TRV), Aggregate Rating: 3.58/5
- Verizon (VZ), Aggregate Rating: 3.73/5
- Exxon Mobil (XOM), Aggregate Rating: 3.74/5
- Caterpillar (CAT), Aggregate Rating: 3.79/5
- Alcoa (AA), Aggregate Rating: 3.82/5
- Disney (DIS), Aggregate Rating: 4.06/5
- Home Depot (HD), Aggregate Rating: 4.07/5
- J&J (JNJ), Aggregate Rating: 4.08/5
- GE (GE), Aggregate Rating: 4.10/5
- 3M (MMM), Aggregate Rating: 4.11/5
We entered these funds into our system and then compared them with a balanced portfolio of dividend-producing ETFs.
|Asset||Fund in this portfolio|
|REAL ESTATE||ICF (iShares Cohen & Steers Realty Majors)|
|FIXED INCOME||TIP (iShares Barclays TIPS Bond)|
|Emerging Market||VWO (Vanguard Emerging Markets Stock ETF)|
|US EQUITY||DVY (iShares Dow Jones Select Dividend Index)|
|US EQUITY||VIG (Vanguard Dividend Appreciation ETF)|
|INTERNATIONAL EQUITY||[DV (iShares Dow Jones Intl Select Div Idx)|
|High Yield Bond||HYG (iShares iBoxx $ High Yield Corporate Bd)|
|INTERNATIONAL BONDS||EMB (iShares JPMorgan USD Emerg Markets Bond)|
- Street's Bottom 10 Dividend Stocks -- 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|
|Street's Bottom 10 Dividend Stocks||35%||212%||4%||14%||5%||16%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||19%||186%||3%||16%||5%||25%|
|Retirement Income ETFs Tactical Asset Allocation Moderate||12%||123%||10%||76%||11%||75%|
Five Year Chart 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. We can see that the one year returns are good but the three month and five year returns are poor with low Sharpe ratios.