We continue to examine stock portfolio recommendations from luminary publications to see whether we can mix ETFs and equities to create a portfolio with good risk/return properties that is easy to live with for the long term investor.
Recently both Forbes and The Street have made recommendations for growth stocks for value investors. We recently covered the Forbes offering which was:
- Allegiant Travel Company (ALGT)
- AmTrust Financial Services, Inc (AFSI)
- Calavo Growers, Inc. (CVGW)
- Coca-Cola Company (KO)
- Tata Motors Ltd Tata Motors (TTM)
- AmerisourceBergen Corporation (ABC)
- Becton, Dickinson and Company (BDX)
- Cal-Maine Foods, Inc. (CALM)
- Darden Restaurants, Inc. (DRI)
- Tim Hortons Inc. (THI)
We then covered the Street's offering which was:
- Apple Inc. (AAPL)
- Polo Ralph Lauren Corporation (RL)
- FedEx Corporation (FDX)
- Buffalo Wild Wings (BWLD)
Today, we cover the Fool's Jim Royal who offers four special stocks paying out dividends that, he claims, blow the lid off the average yield of S&P 500 stocks. In fact, these yields range from 2.5 times to more than eight times the yield of an average S&P stub. Even better, several of these stocks have near-term catalysts that could raise those dividends substantially, driving shares higher.
The idea that dividends drive stock prices shouldn't be too surprising. After all, one of the key ways to value a stock is to look at its future dividend payments and discount them back to the present to determine the stock's intrinsic value. But a key assumption of this model is that a stock has a lot of time to continue growing its dividends. So you need to be extremely wary of companies -- even those with huge dividends -- that have a clearly limited life.
His selections are:
|CVR Partners (UAN)||10.5%|
|Annaly Capital (NLY)||13.9%|
UAN replace by its parent CVI as UAN only went public a month ago.
We entered these funds into our system and then compared it with the Forbes selection and a balanced portfolio of Dividend producing ETFs.
Fund in 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)|
- 4 Special Dividend Plays-- Total of $10K invested equally in each stock
- The Street's Growth at a Reasonable Price 2011 Selections-- Total of $10K invested equally in each stock
- YCharts Growth at a Reasonable Price 2011 Selections -- 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
|Portfolio/Fund Name||1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|4 Special Dividend Plays||62%||349%||2%||4%|
|The Street's Growth at a Reasonable Price 2011 Selections||45%||223%||22%||60%||23%||67%|
|YCharts Growth at a Reasonable Price 2011 Selections||23%||140%||11%||38%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||21%||208%||3%||14%||6%||25%|
|Retirement Income ETFs Tactical Asset Allocation Moderate||15%||152%||9%||71%||11%||72%|
The more detailed analysis and graphs show the volatility of the stock portfolio which has performed well as far as the back testing allows as some of the stocks have only a four year life.
If this is a portfolio for the long term investor, then beware. The short term results look good but the long term results are poor. If you are looking for a long term portfolio, there are others we have covered that have better long term prospects.
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.
Disclosure: Author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.