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The cat's out of the bag: you can free-ride on the investment management decisions of celebrated mutual funds. Instead of buying a mutual fund and paying an annual fee, do-it-yourself investors can inspect the holdings of expensive funds and add them to their own portfolios.

The Performance Strategic Dividend Fund (PSDHX) is a celebrated dividend-yielding mutual fund with a 1.20% expense ratio. It is rated very highly: it earned fives (the highest score) for total return and consistent return from Lipper and four stars from Morningstar. PSDHX investors receive a 1.20% dividend yield, which is coincidentally the same as its expense ratio. Do investors need to pay such high fees for a renowned portfolio?

No. Do-it-yourself investors can boost their returns by purchasing the PSDHX's dividend-paying stock holdings directly. Buying directly sidesteps the fund's recurring annual expenses by paying trading costs and broker fees only once. This fund replication strategy allows retail investors to benefit from portfolio manager research and stock selection at no cost.

Consider the following 10 holdings summarized below:

3M Co. (NYSE:MMM) recently traded at $87.73 per share. At this price level, the stock has a 2.5% dividend yield. For 10 out of the past 10 fiscal years, a share of MMM paid a total of $16.78 in dividends.

MMM shareholders have seen a 7.3% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 3.8, a price-to-earnings multiple of 14.7, and a price-to-sales multiple of 2.1 (trailing twelve months). Over the past decade shareholders saw a 31.8% average annual return on equity.

Dominion Resources, Inc. (NYSE:D) recently traded at $50.38 per share. At this price level, the stock has a 4.2% dividend yield. For 10 out of the past 10 fiscal years, a share of D paid a total of $14.51 in dividends.

D shareholders have seen a -5.1% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 2.5, a price-to-earnings multiple of 19.2, and a price-to-sales multiple of 1.9 (trailing twelve months). Over the past decade shareholders saw a 13.4% average annual return on equity.

E. I. du Pont de Nemours and Company (NYSE:DD) recently traded at $52.01 per share. At this price level, the stock has a 3.2% dividend yield. For 10 out of the past 10 fiscal years, a share of DD paid a total of $14.98 in dividends.

DD shareholders have enjoyed a 13.6% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 5.6, a price-to-earnings multiple of 14.1, and a price-to-sales multiple of 1.2 (trailing twelve months). Over the past decade shareholders saw a 21.2% average annual return on equity.

Enterprise Products Partners LP (NYSE:EPD) recently traded at $49.95 per share. At this price level, the stock has a 5.0% dividend yield. For 10 out of the past 10 fiscal years, a share of EPD paid a total of $17.33 in dividends. Of these dividend payments, a total of $10.23 was paid in the last five years.

EPD shareholders have seen a 9.1% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 3.8, a price-to-earnings multiple of 26.6, and a price-to-sales multiple of 1.1 (trailing twelve months). Over the past decade shareholders saw a 10.3% average annual return on equity.

McDonald's Corp. (NYSE:MCD) recently traded at $100.01 per share. At this price level, the stock has a 2.8% dividend yield. For 10 out of the past 10 fiscal years, a share of MCD paid a total of $10.53 in dividends.

MCD shareholders have sustained a -0.3% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 7.7, a price-to-earnings multiple of 19.0, and a price-to-sales multiple of 3.8 (trailing twelve months). Over the past decade shareholders saw a 20.9% average annual return on equity.

Verizon Communications Inc. (NYSE:VZ) recently traded at $37.84 per share. At this price level, the stock has a 5.3% dividend yield. For 10 out of the past 10 fiscal years, a share of VZ paid a total of $17.05 in dividends.

VZ shareholders have endured a -4.4% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 3.0, a price-to-earnings multiple of 44.5, and a price-to-sales multiple of 1.0 (trailing twelve months). Over the past decade shareholders saw a 11.7% average annual return on equity.

ONEOK Inc. (NYSE:OKE) recently traded at $81.7 per share. At this price level, the stock has a 3.0% dividend yield. For 10 out of the past 10 fiscal years, a share of OKE paid a total of $11.53 in dividends.

OKE shareholders have endured a -5.1% change in share price over the past year.Shares of this mid-cap stock trade at a price-to-book ratio of 3.9, a price-to-earnings multiple of 27.0, and a price-to-sales multiple of 0.6 (trailing twelve months). Over the past decade shareholders saw a 14.3% average annual return on equity.

Union Pacific Corporation (NYSE:UNP) recently traded at $116.11 per share. At this price level, the stock has a 2.1% dividend yield. For 10 out of the past 10 fiscal years, a share of UNP paid a total of $7.24 in dividends. Of these dividend payments, a total of $4.72 was paid in the last five years.

UNP shareholders have seen a 9.6% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 3.0, a price-to-earnings multiple of 17.3, and a price-to-sales multiple of 2.9 (trailing twelve months). Over the past decade shareholders saw a 11.6% average annual return on equity.

United Parcel Service, Inc. (NYSE:UPS) recently traded at $76.7 per share. At this price level, the stock has a 2.7% dividend yield. For 10 out of the past 10 fiscal years, a share of UPS paid a total of $13.56 in dividends.

UPS shareholders have seen a 4.8% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 9.5, a price-to-earnings multiple of 18.6, and a price-to-sales multiple of 1.4 (trailing twelve months). Over the past decade shareholders saw a 24.9% average annual return on equity.

Kimberly-Clark Corporation (NYSE:KMB) recently traded at $72.23 per share. At this price level, the stock has a 3.9% dividend yield. For 10 out of the past 10 fiscal years, a share of KMB paid a total of $18.52 in dividends. Of these dividend payments, a total of $11.44 was paid in the last five years.

KMB shareholders have sustained a -1.8% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 5.2, a price-to-earnings multiple of 18.1, and a price-to-sales multiple of 1.4 (trailing twelve months). Over the past decade shareholders saw a 30.5% average annual return on equity.


Ticker

Company

PSDHX Weight

Div Yield

D

Dominion Resources, Inc.

1.9%

4.2%

DD

E. I. du Pont de Nemours and Co.

2.0%

3.2%

EPD

Enterprise Products Partners LP

1.9%

5.0%

KMB

Kimberly-Clark Corporation

1.7%

3.9%

MCD

McDonald's Corp.

2.2%

2.8%

MMM

3M Co.

1.7%

2.5%

OKE

ONEOK Inc.

2.3%

3.0%

UNP

Union Pacific Corporation

2.2%

2.1%

UPS

United Parcel Service, Inc.

1.7%

2.7%

VZ

Verizon Communications Inc.

1.7%

5.3%

All of these holdings are excellent picks based on track records of long histories of dividend payments and a decade of positive equity returns. These stocks are formidable picks because they have amazing track records and have passed the PSDHX's due diligence process. Investors ought to wait for price-multiples for these companies to fall and opportunistically add them to their portfolios.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing.

Source: Top Performance Strategic Dividend Fund Holdings