As we face the reality of turbulent markets for the next few months, finding equities with strong dividend performance is key to providing a measure of income stability. Jonas Elmerraji from thestreet.com selects eight stalwarts that have recently increased their dividend payouts.
- Microsoft (MSFT) tops the list as the largest firm to announce a dividend hike recently. The firm's total yield is currently 3.19%
- Philip Morris International (PM) stock has gained more than 16% year-to-date with a 4.74% yield at current prices.
- Texas Instruments (TXN) looks strong. The firm has minimal debt with more than $6.7 billion in cash and available-for-sale securities. That financial position should more that support TXN's 30.7% dividend increase recently.
- Yum! Brands (YUM) is the name behind restaurants such as KFC, Pizza Hut and Taco Bell. Yum!'s payout is currently 28 cents per quarter, a 2.24% yield.
- Kroger (KR), 2011 has proven relatively strong so far. The sales growth at Kroger has helped a dividend increase to 12 cents per share.
- Fifth Third Bancorp (FITB) is a diversified Cincinnati-based regional bank with more than $111 billion in assets. This past week, the firm announced a 33.3% dividend increase, bringing its quarterly dividend to 8 cents per share, a 3.33% yield.
- Host Hotels & Resorts (HST) is a public hotel REIT that owns 110 properties worldwide. The firm announced a 33.3% increase in its dividend last week, bringing its yield to 1.53%.
- Realty Income (O) is another firm that hiked its payouts in the most recent quarter. This $4 billion retail REIT owns 2,496 properties. At 15 cents per share, this REIT's quarterly dividend works out to a 5.29% yield at current prices.
This is a diversified set of equities with worldwide exposure. It will be interesting to see how well it performs when we compare these companies with our benchmark set of dividend ETFs that are well diversified.
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,|
- 8 Dividend Stocks Increasing Payouts -- 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 3% 33% 10% 82% 9% 63% Retirement Income ETFs Strategic Asset Allocation Moderate -1% -7% 4% 18% 2% 8% 8 Dividend Stocks Increasing Payouts 4% 21% 5% 15%
The historical performance is limited by the youngest of the equity choices. We can see decent performance as long as far as it goes. So, in addition to increased dividends for short-term income, the equities have performed decently although this set seems to be very sensitive to market turbulence. I am also worried about any bank stock at this point.
(Click charts to expand)
Three-Month Chart One-Year Chart Three-Year Chart Five-Year Chart
I would really like to believe that this set of equities can provide both short-term income and long-term growth. However, it has some disturbing properties in terms of precipitous drops in market stress that is most disconcerting. For now, I'm sticking with the diversified set of ETFs.
Disclaimer: 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.