Jonas Elmerraji from thestreet.com suggests another filter through which to pick safe investments in these choppy times. His approach is to focus in on companies that maintain or increase their dividends -- read the full article for details.
Companies that produce dividends have historically rewarded investors by providing money today rather than the promise of increasing stock value. In these troubled times, a focus on income is much appreciated and an excellent starting point from which to find a selection of stocks.
- Williams (WMB) is one of the select few that actually increased its dividend payout in the last month.
- Verizon (VZ) delivers an enviable 5.62% dividend yield, making it the second-highest-yielding stock in the Dow
- Airgas (ARG) has made leaps and bounds at consolidating a historically fragmented industry. Packaged gasses
- Brinker International (EAT) is a small-cap restaurant operator the company behind Chili's and Maggiano's Little Italy
- Cracker Barrel Old Country Store (CBRL) -- recently opted for a 13.6% dividend raise bringing its total payout to 25 cents per share
- Danaher (DHR) manufacture everything from power tools to medical devices and looks likely to provide good dividends
This is a diversified set and worth measuring against our benchmark ETF portfolio.
The benchmark ETFs are:
|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,|
- 6 Stocks Still Hiking Dividends in September 2011 -- 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|
|Retirement Income ETFs Tactical Asset Allocation Moderate||7%||65%||10%||81%||10%||68%|
|6 Stocks Still Hiking Dividends in September 2011||12%||52%||8%||22%||6%||17%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||5%||43%||6%||30%||4%||15%|
This is an interesting idea and a reasonable set of stocks -- when compared with the buy and hold ETF portfolio it has performed adequately delivering better returns and Sharpe ratios over a five year period. Recently, there has been considerable volatility that, while it doesn't impact dividend performance, it does get the heart racing in a most unpleasant fashion.
Three Month Chart
One Year Chart
Three Year Chart
Five Year Chart
This is an interesting selection and the focus on companies with a strong commitment to dividends is going to be a good place to look. If we could find better companies in this area, this would be very interesting. We will continue to track this selection while we look for ideas on others.
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. I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.