Jordan DiPietro outlines five amazing dividend stocks, vetted by Morningstar and their top stock pickers.
Despite the obvious allure of dividend stocks, investors still aren't catching on. According to Morningstar, as of the end of May, inflows to U.S. stock funds were $25 billion, while inflows to bond funds were nearly $80 billion.
Morningstar polled their “Ultimate Stock Pickers” (their top 26 managers) and found stocks that were the most widely held by all of them. The only criterion was that the stocks were held by at least five of the managers, and that they paid a minimum yield of 3.5%. Below are some stats on five stocks they chose:
|Dividend Yield||Payout Ratio||Years Paying Dividend|
|Vodafone (NYSE: VOD)||6.1%||56.1%||21 years|
|Nestle (OTC: NSRGY.PK)||3.5%||15.9%||10 years|
|Eli Lilly (NYSE: LLY)||5.3%||44.5%||29 years|
|GlaxoSmithKline (NYSE: GSK)||5.1%||179.1%||24 years|
|Total (NYSE: TOT)||5.8%||42.8%||19 years|
Source: Morningstar data; Capital IQ, a division of Standard & Poor’s
We have found that there is wisdom in the counsel of many and it will be interesting to compare the returns with another recommended dividend portfolio that we previously reported. Motley Fool's Matt Koppenheffer selected what he considered five stocks for long term dividend performance. All five have dividend yields well in excess of the S&P's, trade at reasonable valuations.
|Johnson & Johnson (NYSE:JNJ)||3.4%|
|Mattel (NYSE: MAT)||3.5%|
We will also compare this with our ETF dividend portfolio benchmark:
|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||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)|
Fools 5 Great Dividend Stocks Chosen By The Experts -- Total of $10K invested equally in each stock
Fools 5 Dividend Payers to Save your Portfolio -- 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|
|Fools 5 Great Dividend Stocks Chosen By The Experts||30%||192%||3%||9%||7%||27%|
|Fools 5 Dividend Payers to Save your Portfolio||18%||166%||12%||57%||13%||65%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||15%||152%||4%||21%||5%||25%|
|Retirement Income ETFs Tactical Asset Allocation Moderate||12%||123%||10%||82%||11%||80%|
The more detailed analysis and graphs show the volatility of the stock portfolios which has suffered in recent days.
The longer term charts are certainly instructive as we see the experts' stocks doing well in the short term but dropping down in the long term. To be fair, both stock portfolios perform well compared to the buy and hold ETF portfolio, bearing in mind they are the ultimate in laziness "fire and forget." However, it should be recognized that the stock pickers from the professional organizations are more likely to trade. As such, they may have a shorter term interest in the stocks whereas the long term investor is just that, long term.
It should also be noted that both stock portfolios have performed reasonably well in the very short term. When some portfolios may drop rapidly in these stressful times, these are performing nicely.
It is encouraging to see that the experts have made good selections. But when it comes to long term dividend portfolios, asking yourself who you think will be there thirty years from now can give an indication of where to invest.
Disclaimer: We do 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.