Don't be afraid to copy the methods of expensive fund management teams. After all, imitation is the sincerest form of flattery.
The Sterling Capital Equity Income Fund (BAEIX) has won many mutual fund industry awards. It earned fives (the highest score) for total return and consistent return from Lipper and five stars from Morningstar.
Accolades like these motivate investors to pay 1.18% in fund expenses for shares of BAEIX. Do dividend-focused investors need to pay such high fees for a well-constructed portfolio?
Instead of outsourcing portfolio construction by purchasing shares of BAEIX, investors can boost their returns by purchasing the fund'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 twelve dividend paying holdings summarized below:
McDonald's Corp. (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.
Archer Daniels Midland Company (ADM) recently traded at $29.55 per share. At this price level, the stock has a 2.4% dividend yield. For 10 out of the past 10 fiscal years, a share of ADM paid a total of $4.06 in dividends. Of these dividend payments, a total of $2.66 was paid in the last five years.
ADM shareholders have seen a 3.3% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 1.1, a price-to-earnings multiple of 9.0, and a price-to-sales multiple of 0.2 (trailing twelve months). Over the past decade shareholders saw a 12.1% average annual return on equity.
Baxter International Inc. (BAX) recently traded at $57.04 per share. At this price level, the stock has a 2.4% dividend yield. For 10 out of the past 10 fiscal years, a share of BAX paid a total of $7.36 in dividends. Of these dividend payments, a total of $4.46 was paid in the last five years.
BAX shareholders have seen a 15.3% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 4.6, a price-to-earnings multiple of 14.7, and a price-to-sales multiple of 2.3 (trailing twelve months). Over the past decade shareholders saw a 24.0% average annual return on equity.
Emerson Electric Co. (EMR) recently traded at $52.46 per share. At this price level, the stock has a 3.1% dividend yield. For 10 out of the past 10 fiscal years, a share of EMR paid a total of $10.38 in dividends.
EMR shareholders have enjoyed a 12.6% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 3.7, a price-to-earnings multiple of 16.1, and a price-to-sales multiple of 1.6 (trailing twelve months). Over the past decade shareholders saw a 19.9% average annual return on equity.
Intel Corporation (INTC) recently traded at $26.74 per share. At this price level, the stock has a 3.1% dividend yield. For 10 out of the past 10 fiscal years, a share of INTC paid a total of $3.31 in dividends. Of these dividend payments, a total of $2.59 was paid in the last five years.
INTC shareholders have enjoyed a 10.3% 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 11.1, and a price-to-sales multiple of 2.5 (trailing twelve months). Over the past decade shareholders saw a 14.9% average annual return on equity.
Abbott Laboratories (ABT) recently traded at $55 per share. At this price level, the stock has a 3.5% dividend yield. For 10 out of the past 10 fiscal years, a share of ABT paid a total of $11.95 in dividends.
ABT shareholders have seen a -1.4% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 3.5, a price-to-earnings multiple of 18.3, and a price-to-sales multiple of 2.2 (trailing twelve months). Over the past decade shareholders saw a 22.7% average annual return on equity.
Natural Resource Partners LP (NRP) recently traded at $27.14 per share. At this price level, the stock has an 8.1% dividend yield. For eight out of the past 10 fiscal years, a share of NRP paid a total of $13.38 in dividends.
NRP shareholders have seen a 2.1% change in share price over the past year. Shares of this mid-cap stock trade at a price-to-book ratio of 4.0, a price-to-earnings multiple of 26.6, and a price-to-sales multiple of 8.1 (trailing twelve months). Over the past decade shareholders saw a 21.4% average annual return on equity.
Omnicom Group Inc. (OMC) recently traded at $47.19 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 OMC paid a total of $5.18 in dividends. Of these dividend payments, a total of $3.08 was paid in the last five years.
OMC shareholders have seen a 5.9% 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 14.8, and a price-to-sales multiple of 1.0 (trailing twelve months). Over the past decade shareholders saw a 23.0% average annual return on equity.
Pepsico, Inc. (PEP) recently traded at $66.66 per share. At this price level, the stock has a 3.1% dividend yield. For 10 out of the past 10 fiscal years, a share of PEP paid a total of $11.58 in dividends.
PEP shareholders have seen a 0.5% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 4.4, a price-to-earnings multiple of 17.1, and a price-to-sales multiple of 1.6 (trailing twelve months). Over the past decade shareholders saw a 34.8% average annual return on equity.
Target Corp. (TGT) recently traded at $52.14 per share. At this price level, the stock has a 2.3% dividend yield. For 10 out of the past 10 fiscal years, a share of TGT paid a total of $4.44 in dividends. Of these dividend payments, a total of $3.06 was paid in the last five years.
TGT shareholders have seen 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 2.3, a price-to-earnings multiple of 12.2, and a price-to-sales multiple of 0.5 (trailing twelve months). Over the past decade shareholders saw an 18.8% average annual return on equity.
Texas Instruments Inc. (TXN) recently traded at $33.93 per share. At this price level, the stock has a 2.0% dividend yield. For 10 out of the past 10 fiscal years, a share of TXN paid a total of $2.25 in dividends. Of these dividend payments, a total of $1.78 was paid in the last five years.
TXN shareholders have seen a 17.2% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 3.5, a price-to-earnings multiple of 18.1, and a price-to-sales multiple of 2.8 (trailing twelve months). Over the past decade shareholders saw a 16.2% average annual return on equity.
Microsoft Corporation (MSFT) recently traded at $30.24 per share. At this price level, the stock has a 2.7% dividend yield. For nine out of the past 10 fiscal years, a share of MSFT paid a total of $3.35 in dividends. Of these dividend payments, a total of $2.45 was paid in the last five years.
MSFT shareholders have seen a 16.5% change in share price over the past year. Shares of this large-cap stock trade at a price-to-book ratio of 4.0, a price-to-earnings multiple of 11.0, and a price-to-sales multiple of 3.5 (trailing twelve months). Over the past decade shareholders saw a 30.6% average annual return on equity.
Ticker | Company | BAEIX Weight (%) | Dividend Yield |
ABT | Abbott Laboratories | 3.77 | 3.5% |
ADM | Archer Daniels Midland Company | 2.58 | 2.4% |
BAX | Baxter International Inc. | 3.78 | 2.4% |
EMR | Emerson Electric Co. | 3.5 | 3.1% |
INTC | Intel Corporation | 2.94 | 3.1% |
MCD | McDonald's Corp. | 3.73 | 2.8% |
MSFT | Microsoft Corporation | 3.18 | 2.7% |
NRP | Natural Resource Partners LP | 3.28 | 8.1% |
OMC | Omnicom Group Inc. | 2.55 | 2.1% |
PEP | Pepsico, Inc. | 3.86 | 3.1% |
TGT | Target Corp. | 3.64 | 2.3% |
TXN | Texas Instruments Inc. | 2.47 | 2.0% |
These stock picks are formidable because they have amazing track records and because they have passed the BAEIX due diligence process. In addition, each provides a dividend yield in excess of the 10-year treasury. Investors should consider adding MSFT, TGT, INTC, and ADM to their portfolios since they currently trade at attractive valuations. Investors should monitor others on this list and wait for them to trade at compelling price multiples.
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.
