Revisiting The Growth, Dividend And Dividend-Growth Portfolio

Includes: AAPL, ABEV, MCD, PM, TNH
by: Tradevestor

Back in March/April of this year, we published two pieces that discussed forming a portfolio of stocks that have the perfect mix of capital growth, current dividend and dividend growth potential. This article evaluates the returns of this portfolio YTD.

The 5 stocks: The five stocks picked back in the original articles were Apple (NASDAQ:AAPL), Philip Morris International (NYSE:PM), McDonald's Corporation (NYSE:MCD), Terra Nitrogen Company (NYSE:TNH) and AmBev (ABV).

Diversification: Most investors love to stay diversified. These 5 stocks are from different industries - Apple (Technology), Philip Morris (Tobacco), McDonald's (Restaurant), Terra Nitrogen (Agricultural Chemical), and ABV (Beverage). As mentioned in the original articles, these companies also offer international diversification to the investors. PM, for example generates its revenue from abroad. Apple, and McDonald's are omnipresent.

The Performance: As you can see in the table below, this portfolio has easily outperformed the three major indices by a wide margin. The fact that all these stocks pay dividends adds up to the outperformance.

(Source: Table compiled by the author with data from

Note 1: We are using YTD instead of returns from April, the month the original articles were published, because the overall market is pretty much back at the same level it was in April. This portfolio beats the market even if we calculate the returns only from April.

Note 2: Apple had a once in a life time run at the beginning of 2012, so the results might be skewed. Nonetheless, even if Apple is taken out of the portfolio, the returns beat the DOW and S&P and slightly lag behind Nasdaq. But then we have to exclude Apple from the Nasdaq returns as well since Apple makes up more than 10% of the index.

The Message: The message of this article is not to tout our stock picking expertise. To quote Jeremy Siegel, these companies are what you call the "Corporate El Dorados." Companies that you expect to continually outperform the market. Sure, some of them might lag the market sometimes, like MCD has done here but that is where the diversification comes into play.

The Corporate El Dorados

  1. Usually have earnings expectations higher than the market's but their valuations are never obscene. We can visualize the Apple investors nodding their heads.
  2. Yield above the market average.
  3. Have a wide moat.
  4. Continually place a significant percentage of their earnings into the investor's pocket as dividends

Not all 5 companies pass all the checklist items in this example but again the "basket" helps you there.

Conclusion: This article lists just 5 stocks that are part of this group while there are plenty more available in the wide world of market. Some other examples are Yum! Brand (NYSE:YUM) and maybe Starbucks (NASDAQ:SBUX). Get out there and fish for these stocks to merrily exceed the usual returns.

Disclosure: I am long AAPL, PM, MCD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.