Dividend stocks are of critical importance as uncertainty and volatility remain high and look set to be so for some time to come. Dividend stocks continue to provide income irrespective of the value of the equity. Companies that pay dividends have earned a reputation of being well run, dependable companies.
Jonas Elmerraji recently reported on six recent dividend-increasers that we will measure in terms of their historical performance to see whether they are worth consideration for inclusion into a long term stock portfolio.
Albemarle (NYSE:ALB) manufactures a wide range of niche chemical products, from drilling fluid and petroleum catalysts to pharmaceuticals like ibuprofen. Despite a hike of dividend payouts by 6% last week, Albemarle only yields 1.5% at current levels.
Visa (NYSE:V) is a credit card company which is a household name. Visa recently announced a 47% dividend hike. While this is still under a 1% yield, the company is included as it has performed well recently
Enterprise Products Partners (NYSE:EPD) transports and processes natural gas products through its network of pipelines centered on the Gulf Coast. The company has slightly increased its dividend to a 5.6% yield at current levels -- that's a head-turning payout.
Cintas (NASDAQ:CTAS), the leader in uniform rental (along with other services) announced a 10.2% dividend increase bringing a 1.87% yield.
Kinder Morgan (NYSE:KMI) announced a $38 billion acquisition of El Paso (EP), a deal that makes the former the largest midstream energy company in the country. A recent 3% dividend hike brings the firm's total payout to 4.21%
This selection has a heavy bias on energy. However, it is worth tracking to see whether dividends are a sign of a good company or whether the impact of current events is to drive companies to boost dividend yields to prop up stock prices; and once the crisis is over, dividends will drop. We won't get an answer to this now, but by tracking this, we will gain some insight as time rolls on.
We will benchmark this selection against a balanced portfolio of dividend bearing ETFs.
|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 Dividend Stocks for Earnings Season: 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||-2%||-39%||9%||69%||8%||53%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||-1%||-3%||14%||63%||3%||11%|
|6 Dividend Stocks for Earnings Season|
KMI is the newest stock in the bunch and so the history doesn't go back far enough to be meaningful in any practical sense, so we will have to reserve judgement on long term performance until we have had time for track record.
Without really knowing the companies and recognizing that six equities will lead to volatility, the short history this group has had is enough to make one seasick with the ups and downs. At one level, you can say that it is up since inception but down over three months and it has done enough to age most investors quite severely.
(Click on charts below to enlarge)
This is a portfolio we will watch to see whether its gyrations continue or whether they smooth out. For now, this is strictly a watching brief.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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.