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  • How to reinvest dividends? A new approach to the "Dogs of Dow" strategy 3 comments
    May 1, 2011 7:19 PM | about stocks: MCD, T
    We have decided to upgrade one of the DOW dividend Investment Strategy. We hope this improvement will help to achieve better return on investments. We have chosen to “improve” strategy “Dogs of the Dow”.
    The basis of our new portfolio “Portfolio #12 -DDD” is “Portfolio #1 - Dogs of the Dow”.

    Everyone knows that the dividends must be reinvested back. Usually we have reinvest dividends into stocks of the same company.

    Is there a better way to reinvest dividends? We think so.

    We have decided to reinvest dividends into companies with the best rates of profitability in this portfolio. We have chosen only one criterion – profitability of the retained earnings.

    Estimation is very easy: all net profit minus all dividends during 10 years. Second step: (EPS’10-EPS’01)/(net profit minus all dividends during 10 years). The companies with the biggest profitability are our stocks for reinvesting.

    AT&T Inc – 27.91%;
    McDonald's Corporation – 24.49%;
    Chevron Corp – 15.09%.

    So, we will divide every dollar of dividends into the three parts and will reinvest dividends into the stocks of TMCD and CVX.
    We launched portfolio #12 –DDD on April 21          
     
     
    Portfolio #12 –DDD – 2.16%.

    Benchmarks:
    DJIA – 2.44%
    SP500 – 1.96%.

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Comments (3)
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  • Thomsett
    , contributor
    Comments (136) | Send Message
     
    Nojus, I like your idea, it makes sense to chase those higher yields - and the three companies are themselves excellent long-term performers. I am working on a dividend strategy as well, involving timing of dividend income and I may want to re-focus this to track along the same lines as your strategy.

     

    Excellent! - Michael
    3 May 2011, 08:12 AM Reply Like
  • Nojus
    , contributor
    Comments (29) | Send Message
     
    Author’s reply » Thank you Micheal. We'll report about portfolio's performance.
    3 May 2011, 05:26 PM Reply Like
  • Thomsett
    , contributor
    Comments (136) | Send Message
     
    I will follow with interest. Currently I have a new book proposal being considered by publisher on this very topic.
    4 May 2011, 08:40 AM Reply Like
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