We are always looking for ideas to build long term asset value, especially when that involves dividend bearing stocks. Tyler of DividendMoney.com focuses in on the getting rich slowly with dividend stocks. The dividend process is slow, but it is low risk and re-investing dividends has a compound effect. His example is
Take a boring old dividend paying stock - or at least one that seems that way - paying 5% in dividends yearly and racking up a conservative 5% in capital appreciation. Begin with $1,000 and reinvest those dividends. After 30 boring years, you'll possess a staggering $18,700! (Let's multiply that number by 10X for a more realistic example)… $187,000 How boring is that?
The DRiP Investing Resource Center compiles a list of 100 companies that have consistently increased their dividend payouts for over 25 years straight. When you consider all the ups and downs the market has seen this past quarter century, it's an especially impressive feat, attesting to the strength of the firms that made the cut.
The staff at Kapitall.com extracted the DRiP's dividend champions that have performed the best over the past year and that is going to be a list of companies we will examine.
- Helmerich & Payne Inc. (HP): Oil & Gas Drilling & Exploration
- Nordson Corporation (NDSN): Diversified Machinery industry
- National Fuel Gas Co. (NFG): Gas Utilities industry
- Raven Industries Inc. (RAVN): Printed Circuit Boards
- V.F. Corporation (VFC): Apparel Clothing Textile industry
- The McGraw-Hill Companies, Inc. (MHP): Book Publishing
- Exxon Mobil Corporation (XOM): Major Integrated Oil & Gas
- Hormel Foods Corp. (HRL): Meat Products
- Walgreen Co. (WAG): Drug Stores
- W.W. Grainger, Inc. (GWW): Industrial Equipment
Having already stated that these have seen rapid stock price gains over the past year, we would expect to see a very strong one year performance, but it will be interesting to see how it has performed over the longer period. These are all solid businesses that could make part of a long term stock portfolio. This is of interest to me and certainly worth benchmarking.
|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|
- 10 High Growth Dividend Champions -- 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||YTD |
|1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|10 High Growth Dividend Champions||14%||9%||29%|
|Retirement Income ETFs Tactical Asset Allocation Moderate||1%||1%||21%||10%||77%||8%||54%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||5%||3%||24%||20%||118%||3%||8%|
McGraw-Hill is the latest of the companies to be traded and this limits the historical view. As expected the short term returns are good but when we look at the Sharpe ratios, we see that they are low relative to their returns which indicates a fair degree of volatility.
Three Month Chart One Year Chart Three Year Chart
The history almost reaches three years (April 2012) and we can see that the stock selection had a burst in 2011. We can see in the table below that Nordson is the dominant stock in the portfolio.
|Fund in this portfolio||Percentage|
|HP (Helmerich Payne)||6.45%|
|NDSN (Nordson Corp)||39.25%|
|NFG (National Fuel Gas Co)||5.61%|
|RAVN (Raven Industries, Inc.)||10.82%|
|VFC (V F Corp)||8.07%|
|MHP (The McGraw-Hill Companies, Inc)||5.75%|
|XOM (Exxon Mobil Corp)||4.69%|
|HRL (Hormel Foods)||6.23%|
|WAG (Walgreen Co.)||3.88%|
|GWW (W.W. Grainger, Inc.)||9.26%|
Five Year Chart
As I stare at the graphs, I don't think that the performance has been spectacular, except for the burst last year. Other than that, it is pretty steady. That is not a bad thing, but this selection has too much volatility and too little history for me to do anything other than watch to see how it goes. There is always the danger of chasing short term returns and missing the solid, long term companies.
I will return to the DRiP list to see if there are other filters we can apply.
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.