Morgan Stanley recently released a list of their "20 Best Dividend Stocks In America". Given that there is sustained interest in dividend bearing stocks, I thought this would be a list to review. In addition Rebecca Lipman of Kapital.com compared these picks with the ratings of other premier sell-side analyst firms. The result was that only 5 on this list had multiple citings and on the other 15, MS were on their own.
Here are the five that had some (a little) consensus:
- Pfizer (PFE): Offers prescription medicines for humans and animals worldwide.Dividend yield at 3.89%.
- Honeywell (HON): A diversified technology and manufacturing company worldwide. Dividend yield at 2.78%.
- Accenture . (ACN): A management consulting, technology services, and outsourcing company.Dividend yield at 2.41%.
- General Electric (GE): Operates as a technology, service, and finance company worldwide. Dividend yield at 3.41%.
- Las Vegas Sands. (LVS): Develops, and operates various integrated resorts. Dividend yield at 2.37%.
This is reasonably well diversified -- there may be some overlap with Honeywell and GE but not too much. I am going to make this into a selection and measure the results.
- Baxter International (BAX): Develops, manufactures, and markets products for people with a number of acute medical conditions.Dividend yield at 2.59%.
- Invesco (IVZ): Provides its services to high net worth individuals. Dividend yield at 3.22%.
- Marsh & McLennan . (MMC): Operates in the areas of risk, strategy, and human capital. Dividend yield at 2.95%.
- Lear (LEA): Engages in the design and manufacture of seat systems and related components for automobiles and light trucks. Dividend yield at 1.5%.
- Philip Morris (PM): Engages in the manufacture and sale of cigarettes and other tobacco products. Dividend yield at 4.02%.
- Nucor (NUE): Engages in the manufacture and sale of steel and steel products. Dividend yield at 4.02%.
- ACE (ACE): Provides a range of insurance and reinsurance products. Dividend yield at 2.75%.
- Marathon Petroleum (MPC): Engages in refining, transporting, and marketing petroleum products. Dividend yield at 2.36%.
- Colgate-Palmolive (CL):Manufactures and markets consumer products worldwide. Dividend yield at 2.45%.
- Western Union (WU): Provides money transfer and payment services worldwide. Dividend yield at 2.43%.
- Cardinal Health (CAH): Operates as a healthcare solutions company. Dividend yield at 2.35%.
- Emerson Electric (EMR): Operates as a diversified manufacturing and technology company. Dividend yield at 3.61%.
- The Interpublic Group (IPG): Provides advertising and marketing services worldwide. Dividend yield at 2.30%.
- Archer Daniels Midland (ADM): Procures, transports, stores, processes, and merchandises agricultural commodities. Dividend yield at 2.43%.
- LyondellBasell Industries NV (LYB): Manufacturers and sells chemicals and polymers, refines crude oil, produces gasoline blending. Dividend yield at 4.11%.
Yield data from Kapitall.com
This is another interesting group of companies -- some are household names and some are much less well known. I am going to make this into a selection and measure the results.
We will compare the top five, the top twenty and the fifteen that Morgan Stanley promote on their own with each other and our dividend bearing ETF benchmark portfolio:
| Asset | Fund in this portfolio |
|---|---|
| REAL ESTATE | (ICF) iShares Cohen & Steers Realty Majors |
| CASH | CASH |
| 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 |
- Morgan Stanleys Top 5 Dividend Stocks -- Total of $10K invested equally in each stock
- Morgan Stanleys Top 15 Solo Recommended Dividend Stocks -- Total of $10K invested equally in each stock
- Morgan Stanleys Top 20 Dividend Stocks -- 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 | 1 Week Return* | YTD Return** | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|---|---|
| Retirement Income ETFs Tactical Asset Allocation Moderate | 1.6% | 3.0% | 7.7% | 93.5% | 13.7% | 114.9% | 7.0% | 58.1% |
| Retirement Income ETFs Strategic Asset Allocation Moderate | 3.0% | 5.8% | 2.0% | 16.7% | 12.5% | 97.3% | 1.9% | 8.5% |
| Morgan Stanleys Top 20 Dividend Stocks | 4.6% | 8.9% | 2.7% | 14.6% | ||||
| Morgan Stanleys Top 15 Solo Recommended Dividend Stocks | 5.0% | 9.2% | 2.2% | 7.9% | ||||
| Morgan Stanleys Top 5 Dividend Stocks | 4.5% | 9.1% | 2.3% | 17.3% | 28.5% | 116.7% | -0.1% | -0.9% |
*: NOT annualized **YTD: Year to Date
Because of Philip Morris, two of the portfolios have a shorter history and so we will use the graphs to review the performance. What we can say is that the top five stock selections performed well over the three year horizon but poor returns over the five year horizon.
Three Month Chart
One Year Chart
Three Year Chart
Five Year Chart
The graphical data gives me the clearest tradeoff -- especially when you look over a three year timeframe. The top five dividend stocks have performed well. Given that these are recommended by more than one company, are strong brands and have performed well, I think this is a good starting point. I would not say that these are buy and hold for ever and I would review their selections annually and then perform the same analysis to see whether to swap in some different companies.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: 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.
