It is my goal to create an ever-increasing income stream from dividend growth stocks, while it is my desire to beat the S&P 500 (SPY) index over the long term. If you have too many goals, often they will start to conflict with each other. We need to determine what is most important, then set those aside as goals and leave everything else as desires.
If I am achieving my goal of creating an ever-increasing income stream from dividend investments, I would not drastically change my investing strategy if I were to under-perform the S&P. However, the opposite isn't true. If I were not consistently growing dividend income, but nearly always beating the S&P, it would be time to totally rethink my strategy.
To go a step further, I believe in the long term my dividend income will rise AND I will beat the S&P 500. Otherwise, it would not be a realistic desire. This has been the case since I have been publically tracking my dividend growth portfolio (see year by year results here).
Through August 31st, my investment in Vanguard 500 Index Investor (VFINX), which I use as a proxy for the S&P 500, was down 1.86%. Below are several dividend growth stocks with double-digit total returns that have out-performed the S&P 500 so far in 2011:
Abbott Laboratories (ABT)
Yield: 3.6% | 2011 Return: 11.6%
Abbott Laboratories is a diversified life science company and is a leading maker of drugs, nutritional products, diabetes monitoring devices, and diagnostics.
Automatic Data Processing Inc. (ADP)
Yield: 2.9% | 2011 Return: 10.9%
Automatic Data Processing Inc. is one of the world's largest independent computing services companies, providing a broad range of data processing services.
Yield: 2.5% | 2011 Return: 15.7%
Colgate-Palmolive Company (Colgate) is a major consumer products company that markets oral, personal and household care, and pet nutrition products in more than 200 countries and territories.
The Clorox Company (CLX)
Yield: 3.4% | 2011 Return: 13.4%
The Clorox Company is a diversified producer of household cleaning, grocery and specialty food products and is also a leading producer of natural personal care products.
Chevron Corporation (CVX)
Yield: 3.1% | 2011 Return: 14.4%
Chevron Corporation is a global integrated oil company (formerly ChevronTexaco) with interests in exploration, production, refining and marketing, and petrochemicals.
Consolidated Edison, Inc. (ED)
Yield: 4.3% | 2011 Return: 16.6%
Consolidated Edison, Inc. is an electric and gas utility holding company that serves parts of New York, New Jersey, and Pennsylvania.
Genuine Parts Company (GPC)
Yield: 3.3% | 2011 Return: 11.2%
Genuine Parts Co is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products.
Kimberly-Clark Co. (KMB)
Yield: 4.1% | 2011 Return: 13.7%
Kimberly Clark Corp. is a global consumer products company that produces tissue, personal care and health care. Its brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark.
McDonald's Corporation (MCD)
Yield: 2.7% | 2011 Return: 25.2%
McDonald's Corporation is the largest fast-food restaurant company in the world, with about 32,500 restaurants in 117 countries.
Piedmont Natural Gas (PNY)
Yield: 3.6% | 2011 Return: 11.3%
Piedmont Natural Gas distributes natural gas to residential, commercial and industrial customers in portions of North Carolina, South Carolina and Tennessee.
Note that my returns above include the the timing of current year purchases.
My goal is to generate an ever-increasing income stream from dividends. My desire is to beat the S&P 500 over time. We should never confuse desires with goals. In the end, I will not sell a great dividend stock for under-performing the S&P.
Full Disclosure: No position in the aforementioned securities. See a list of all my dividend growth holdings here.