Best Risk Adjusted Total Return Dividend Stocks

by: Richard Shaw

Market beating higher relative total return for the volatility incurred is a good thing. We looked for that higher relative risk adjusted performance today among solid dividend stocks.

We identified the 200 highest yielding stocks that have paid and increased dividends each year for at least five years (after eliminating the top 10, just in case they were troubled instances).

We then calculated a "relative risk adjusted total return" for each stock for 3, 5 and 10 years by dividing the nominal total return by the ratio of the standard deviation of return of each stock to the standard deviation of the S&P 500.

In other words, if a stock had a ,higher volatility than the S&P 500, we reduced the nominal return to get the relative risk adjusted return and if the volatility was less than the S&P 500, we increased the nominal return to get the relative risk adjusted return.

The 11 stocks in this list had a higher relative risk adjusted return than the S&P 500 over 3, 5 and 10 years. Mostly, they also had higher nominal returns and mostly they had higher volatility. They are the only ones with the multi-period higher risk adjusted return.

The blue shaded area shows the relative risk adjusted returns. The green shaded cells show lower volatility than the S&P 500, and pink shaded cells show lower nominal total return than the S&P 500.

SeekingAlpha links to the 11 stocks:

Kimberly-Clark Corporation (NYSE:KMB)
Armanino Foods of Distinction, Inc. (OTCPK:AMNF)
Altria Group Inc. (NYSE:MO)
Reynolds American Inc (NYSE:RAI)
Magellan Midstream Partners, L.P. (NYSE:MMP)
Sunoco Logistics Partners (NYSE:SXL)
Enterprise Products Partners LP (NYSE:EPD)
Genesis Energy LP (NYSE:GEL)
Sempra Energy (NYSE:SRE)
Dominion Resources Inc (NYSE:D)
CMS Energy Corp (NYSE:CMS)

Within these 11 stocks, MMP is in our latest "Rational Risk Equity Income Investor" letter monthly list of quantitatively selected dividend stocks, and in the subset of those stocks with a net favorable independent analyst rating. SXL is also in our current quantitative list, but has strongly conflicting independent analyst ratings. Our investment letter site is at

Disclosure: QVM has positions in KMB and MMP as of the creation date of this article (January 8, 2014). We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article, but are compensated retroactively by Seeking Alpha based on readership of this specific article.

General Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.