For the long term investor, dividend stocks have significant benefits in terms of providing income and growth potential. We continue to examine different portfolios to see what we can learn and use to further our investment portfolios.
We have been looking at the hit parade of dividend stocks. We have already looked at the bottom 10 and we now look at the ten stocks that sit above them and we can compare their performance along with the performance of a dividend ETF portfolio.
Jake Lynch of The Street 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 ten Dow dividend stocks and compare them with a dividend ETF portfolio.
The 10 equities that are outside of the bottom 10 according to this report are:
- Intel (INTC), Aggregate Rating: 4.11/5
- AT&T (T), Aggregate Rating: 4.11/5
- Pfizer (PFE), Aggregate Rating: 4.21/5
- BofA (BAC), Aggregate Rating: 4.24/5
- Boeing (BA), Aggregate Rating: 4.27/5
- American Express (AXP), Aggregate Rating: 4.27/5
- McDonald's (MCD), Aggregate Rating: 4.27/5
- DuPont (DD), Aggregate Rating: 4.28/5
- Cisco (CSCO), Aggregate Rating: 4.31/5
- P&G (PG), Aggregate Rating: 4.33/5
We entered these funds into our system and then compared them to a balanced portfolio of Dividend producing ETFs.
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||IDV (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 10 Dividend Stocks That Can Be Beaten -- Total of $10K invested equally in each stock
- 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 Performance Comparison
|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%|
|Street's 10 Dividend Stocks That Can Be Beaten||16%||114%||3%||8%||5%||16%|
|Retirement Income ETFs Tactical Asset Allocation Moderate||12%||123%||10%||76%||11%||75%|
Three Month Chart
click to enlarge
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.
The surprising result is that this portfolio of "better equities" underperforms the stocks ranked lower. In this portfolio, MCD and BA are the well performing stocks, in the bottom portfolio, CAT is the dominant performer.
Despite the household names, neither of these portfolios deliver compelling 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.