We continue to seek out and measure investment ideas from different people to see whether their ideas have merit for a long term investor. Recently, the Motley Fool Stock Advisor special report listed a number of stocks that they recommend. The classed them into:
5 All Around Dividend Rock Stars
- ExxonMobil (NYSE: XOM) global energy blue chip
- Johnson & Johnson (NYSE: JNJ) is a diversified healthcare products powerhouse
- PepsiCo (NYSE: PEP) is a snacks and beverages giant
- Procter & Gamble (NYSE: PG) the branded consumer goods leader
- Wal-Mart (NYSE: WMT) the low-price retail kingpin
2 High-Yield Dividends Divas You Can Buy
- AT&T (NYSE: T) gives a 6% dividend yield that's a great combination of dividends and safety. Currently, that dividend comes from AT&T paying out less than half of its earnings.
- New York Community Bancorp (NYSE: NYB) hasn't raised its dividend since 2005. However, with bank being a four letter word, its stock is down to a level where its $1 dividend gives you an 8.4% yield.
2 Dividend Up-and-Comers You Don't Want to Miss
- Greenhill & Co. (NYSE: GHL) is an investment bank. It's a high quality investment bank that lands the same caliber of people (or better) than the folks at Goldman, Morgan Stanley (NYSE: MS), or JPMorgan Chase (NYSE: JPM).
- Owens & Minor (NYSE: OMI). Owens & Minor is a distributor of medical and surgical equipment, as well as a provider of outsourced logistics and inventory management services.
This, at least, is an interesting selection. The dividend rock stars are great names in long term companies that are likely to ride out these turbulent times as well as anybody. The high yield dividend companies blend a beaten down stock with a long term company, and the up and comers add some risk and return potential.
Let's see how they measure up to our dividend ETF benchmark.
|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)|
- 5 Rockstars 4 Dividend Winners For Christmas -- 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%||9%||10%||78%||8%||54%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||-0%||-25%||13%||75%||2%||1%|
|5 Rockstars 4 Dividend Winners For Christmas||-5%||-25%||2%||11%|
We have incomplete data because of some of the selections. However, what I see from the table doesn't really impress me. There are other selections that perform considerably better than this.
The short term performance has been better as dividend stocks become more highly valued and perhaps there is more willingness to consider certain bank stocks.
One Year Chart
Three Year Chart
Five Year Chart
The five year chart shows that this selection did better than the benchmark through the first downturn but worse than the benchmark in the second. I simply can't find a reason to use this selection and so I would take it back to the store immediately after Christmas and get a refund!