Big Changes At The Top Of The Dividend Achievers Index

Apr. 28, 2019 5:46 PM ETABT, CMCSA, IVV, LOW, MSFT, NFLX, NKE, PG, QCOM, TXN, V, VIG, VYM27 Comments
Dale Roberts profile picture
Dale Roberts


  • The Dividend Achievers Index insists on 10 years of annual dividend growth; companies must also pass the proprietary financial health screens.
  • Two leading constituents from the S&P 500 have made the grade with that successful track record of dividend increases. Visa and Comcast add incredible growth potential.
  • Proctor & Gamble is back again. This one appears to leave the index and then is welcomed back with regularity.
  • My CVS, Pepsi and Qualcomm get the boot.

It is incredible how quickly things can change with an Index that is cap weighted and is also practising a form of smart beta. As you may know the Dividend Achievers Index provides one of the most popular dividend growth funds by way of Vanguard's (VIG). In fact the fund has almost $34 billion in assets under management. I believe it is the most popular US dividend ETF followed by its Vanguard cousin, high yield (VYM).

And it has a very successful track record.

Many will be drawn to the fund due to the potential to deliver better risk adjusted returns. Here's VIG vs the S&P 500 (IVV) from VIG inception of May of 2006.

Portfolio 1 is VIG.

Portfolio 2 is IVV.

Sortino ratio is .89 for VIG and .78 for IVV. VIG simply delivered better risk adjusted returns.

Heading into my semi-retirement years, or my new life/work stage, I embraced the Achievers index, for that potential of nice returns and lesser volatility and drawdown in a major market correction. A market beat is not important, but investors will certainly take that when it comes along.

My readers will know that in early 2015 I sold our VIG positions and purchased 15 of the largest cap Dividend Achievers. Here's Buying Dividend Growth Stocks Without Looking. Those top holdings essentially track the underlying total index.

Portfolio 1 is the 15 skimmed largest cap Dividend Achievers.

I made a decision to hold all of the original 15 companies, no matter what. I practiced buy and hold. More than that I only added to the companies that were out of market favour. Here's Can You Simply Add To Your High Quality Dividend Growth Stocks When They're Down, Because They're Down?

I've held and added even when companies were kicked out of the Index.

Big Changes At The Top

Procter & Gamble (PG) has been in and out of the index, but now it's back and it's the largest position in the fund. That might provide more of that consumer staple stability. It's certainly no growth machine. We might like PG for how it holds up in any major market turbulence.

Visa (V) has passed that dividend threshold and quickly makes its way to the top of the index due to its massive stock run up over the last several years, and hence massive market cap. It sits at #11 on the S&P 500 weighting.

Here's the recent performance of Visa vs IVV. Visa is Portfolio 1.

This is an incredible growth story that shows no signs of letting up. With Visa today you are certainly not buying a current generous earnings yield, you are buying that growth story. The Dividend Achievers Index is now buying into that growth story. And you're not buying a juicy dividend. The yield is .61%. But we should remember that in the end it is the total return that mostly determines our success.

Metrics from Seeking Alpha.

This article from D.M. Martins Research suggests (again) that Visa is a Growth Story That Continues With Reasonable Valuations. I am certainly no analyst but I've worked in the financial world and the fintech space - Visa is certainly in the sweet spot for how we spend our monies today, and it appears to be set up nicely for the future payment schemes. All said, the Index has added an incredible total return growth machine.

The Dividend Achievers Index Dials In Comcast

The index also welcomed Comcast Corporation (CMCSA). This conglomerate offers a nice combination of current earnings yield and growth.

As you may know Comcast is a massive entertainment and cable conglomerate. Have a look at their more than interesting corporate history, from their site.

Of course Comcast is most known for NBC and Universal Studios. You could say Saturday Night Live and Jurassic Park and Stranger Things join the Index. There's also the Golf Channel (I thank you for that), CNBC and more and more and more. And that more includes AT&T Broadband, SKY and Comcast Cable.

Here's the stock performance from 2007. The market beat if more of a recent event over the last several years.

Heres' the financials courtesy of Morningstar. This space is on an acquisition and partnership frenzy as content is still king and the giants are realigning for supremacy in the movie and tv content space. Netflix (NFLX) has shaken things up, just a bit.

All said we can see that Comcast if a massive conglomerate that grows revenues and income and free cash flow considerably over time. Has the index found another long term rock?

Will I continue to track the index?

When I look at my holdings, I see only 11 companies in the top 20 of the current Dividend Achievers Index. I do not hold those new growth engines that have considerable weighting in the Index. My growth engine might continue to be Microsoft (MSFT) Texas Instruments (TXN) Qualcomm (QCOM), Lowe's (LOW), Abbott Labs (ABT) and Nike (NKE).

It will be interesting to see if my 15 holdings continues to track the revamped and continually evolving total Index. If so that tells us that the returns potential comes as much from the types of companies that we hold (index construct), compared to the actual specific holdings. There might be enough similarity in the growth prospects and financial stability of the 2015 top holdings compared to the top 2019 holdings. I am happy to hold. Again, the index screens can be a bit touchy at times. Please have a read of Looks Like Smart Beta Just Got Dumb and Dumber.

It's buy and hold vs smart beta alterations.

There is certainly a lot of flux within the top holdings. You may find this of interest. The original top ten from inception to the end of 2007: Chevron, Exxon Mobil, Procter and Gamble, Coca-Cola, IBM, General Electric, Johnson and Johnson, Wal-Mart, Pepsico and American International Group.

Top Ten end of 2008: Chevron, Exxon Mobil, Procter and Gamble, Coca-Cola, IBM, McDonald's, Johnson and Johnson, Wal-Mart, Pepsico and AT&T.

I'll continue to keep score, and keep an eye on the Dividend Achievers Index.

Author's note: Thanks for reading. Please always know and invest within your risk tolerance level. Always know all tax implications and consequences. If you liked this article, please hit that "Like" button. Hit "Follow" to receive notices of future articles.

This article was written by

Dale Roberts profile picture
Dale Roberts is the Chief Disruptor at the Cut The Crap Investing blog. Cut The Crap will introduce Canadians to the many sensible low fee investment options in Canada. Canadians currently pay some of highest investment fees in the world. Dale will help Canadians on the path to creating their own low fee portfolios or direct them to the lower fee managed portfolio solutions. Dale was a former Investment Funds Advisor and Trainer at Tangerine Investments, and is a still recovering former award-winning advertising writer and creative director. Dale has been writing on Seeking Alpha from 2013, covering asset allocation, dividend investing and retirement. As always past performance is not guaranteed to repeat. You should always conduct your own research or speak to a financial advisor. If you don't know what you're doing, don't do it. Dale's articles are not investment advice.

Disclosure: I am/we are long BNS, TD, RY, AAPL, BCE, TU, ENB, TRP, CVS, WBA, MSFT, MMM, CL, JNJ, QCOM, MDT, BRK.B, WMT. 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.

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