Jim Royal from the Motley Fool recently announced five huge dividend plays.
We have to recognize that we are in a period of heightened sensitivity and therefore heightened volatility. We know that the US and Europe are caught between a rock and a hard place with the need to reduce deficits without causing the tender green shoots of recovery to wither. Therefore, we are going to see big swings as we go through this period. The question is whether this heightened sensitivity gives rise to modifying and investment strategy.
He selects one energy and five energy distribution companies:
Company | TTM Yield | Distributions per share |
|---|---|---|
| Atlas Pipeline Partners LP (APL) | 5.4% | $1.59 |
| Linn Energy LP (LINE) | 7.2% | $2.67 |
| Inergy LP (NRGY) | 9.8% | $2.82 |
| El Paso Pipeline Partners LP (EPB) | 5.1% | $1.79 |
| Boardwalk Pipeline Partners LP (BWP) | 8.1% | $2.08 |
| Energy Transfer Partners LP (ETP) | 7.9% | $3.58 |
| Average | 6.4% |
Source: Capital IQ, a division of Standard & Poor's.
It is certainly worth considering high dividend stocks to provide stable income along with the recognition that, in the short term, energy and its distribution is likely to fare well as the summer wanes and we move towards the shorter days and longer nights in the northern hemisphere. So we are going to evaluate this portfolio for its returns to see whether it would be worth considering this portfolio as part of an investment strategy.
We will compare this with our ETF dividend portfolio benchmark:
| Asset | ETF in portfolio |
|---|---|
| REAL ESTATE | ICF (iShares Cohen & Steers Realty Majors) |
| CASH | CASH |
| 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) |
- Jim Royal`s August 2011 Huge Dividend Play -- Total of $10K invested equally in each stock
- Fool's 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 |
|---|---|---|---|---|---|---|
| Retirement Income ETFs Tactical Asset Allocation Moderate | 9% | 84% | 11% | 81% | 10% | 71% |
| Jim Royal`s August 2011 Huge Dividend Play | 2% | 11% | 18% | 56% | ||
| Retirement Income ETFs Strategic Asset Allocation Moderate | 10% | 67% | 4% | 17% | 4% | 16% |
Over one to three years, you can see how the energy sector has done well but in recent days, there are some very scary cliff edges.
Three Month Chart
click to enlarge
One Year Chart
Three Year Chart
Five Year Chart
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: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
