What I Like About Dividend Achievers

So far I have concentrated my attention primarily on the Dividend Aristocrats and the High-Yield Dividend aristocrats, both published by the S&P. Those lists include companies which are members of the S&P 1500 and which have raised their dividends for more than 25 consecutive years.

That wasn't enough for me, however. I have noticed that there are a lot of great dividend-paying companies which are not as established as the Dividend Aristocrat family of indexes. The only reason why they didn't come under my radar screen was simply because they had raised their annual payment for less than 25 years. These stocks do have the possibility of becoming the next dividend aristocrats.

My previous research showed that companies stay about 6.5 years on average in the dividend aristocrats index. The current aging of the aristocrats was about 36 years. Thus, in order to take full advantage of increasing dividend payment for a maximum amount of time, I believe that it pays to buy stocks that could become the next aristocrats, before they join the list.

The list that caught my attention was the US Broad Dividend Achievers list, prepared by Mergent Inc. It is broader than the S&P 1500 dividend achievers list that I have previously written about. To quote from the company's website:

The Broad Dividend Achievers™ Index is designed to track the performance of U.S. publicly traded of dividend paying companies that meet the "Dividend Achievers" requirements. To become eligible for inclusion in the Index, a company must be incorporated in the United States or its territories, trade on the NYSE, NASDAQ or AMEX, and have increased its annual regular dividend payments for the last ten or more consecutive years. In addition, Mergent requires that a stock's average daily cash volume exceed $500,000 per day in Nov. and Dec. prior to reconsitution.

This index has managed to outperform the S&P 500 over the past 10 years by 1% annually on average by performing better than average in 4 of the past 10 years.

According to Mergent Inc, a $10,000 investment at the end of 1997, would be worth about $16,148 by the end of 2007.

There's an ETF that tracks the index. The Ticker is PFM.

Comments

[Robert1943]

There is a significant hazard in drawing conclusions from comparisons that span a 10-year period that includes (1) the bubble (1998 and 1999) and (2) the burst (2000, 2001, and 2002). As expected, the S&P way outperformed the dividend achievers during the bubble, and conversely the dividend achievers way outperformed the S&P during the burst. No surprises here, and indeed people with more conservative investing styles of any type showed the same pattern.

But if you look at more "normal" times (the five year period between 2003 and 2007) you find the S&P outperforming 80% of the time. If you want to discard 2007 as another anomaly, during which the dividend achievers collapsed because of the financial services problems, you are still left with the S&P easily leading 75% of the time in the other four years. And this does not take tax considerations into account, with the dividend achievers having to give up more of their gains each year.

[bill d]

So at the end of 10 YEARS your gain on the total return would have been $1500 more than the S&P ?????
Astoundingly unimpressive. I love dividends but if I can't do better than these I'll go back to CD's.
Am I missing something ????

[Whisper On The Wind]

Gee, Bill D, if you start now with the CDs, you might actually make some money from them in the next 10 years. Personally, thanks to the banks and the mortgage slackers who didn't pay their loans, CDs are blowing in the wind. I'm picking my stocks individually these days, until the market recovers.

[Dividend Growth Investor]

Outperforming the S&P 500 with a passive investing strategy is not what I am really looking for. This list only provides a starting point for further research into dividend stocks. The past 10 years is just a sample, from which I draw conclusions. If you own a somewhat diversifed portfolio with more than 30 stocks in it, you are more likely to perform close to the stock market averages over a large periods of time ( 10+ years).
If you have checked my posts before, you might have noticed that I don't like every dividend stock simply because it is a dividend grower. I am looking for companies that could afford to increase their dividend payments to shareholders for as long as possible. If I could achieve $1 in income for 20 years from a $1 investment now, I would be a happy person :-)