Dividend Growth Index Update Q4 2011

Back in September, several dividend bloggers created a Dividend Growth Index of 24 companies. Eight members each chose three investments.

Here is the current state of the index, in PDF form:
Dividend Growth Index

I’ll review the basic performance of my picks.

My three picks were Walmart (WMT), Novartis (NVS), and Energy Transfer Equity (ETE). My reasoning for picking those three investments can be found here.

Over the last quarter, the results were as follows:

Walmart rose from approximately $50 to approximately $60, and paid a quarterly dividend. The most interesting piece of news was that Walmart’s service, Vudu, launched on XBOX 360 as a competitor to Netflix and is integrated with the Kinect. Vudu is a tiny part of Walmart, but it’s interesting news nonetheless. Other than that, it was just business as usual; Walmart’s EPS continued inching up at a decent rate, which is to be expected from the combination of business growth and share repurchases.

Novartis rose a few dollars from the mid to upper $50’s. The company pays one annual dividend, so there was no dividend for this quarter. Novartis had a significant amount of pharmaceutical news reports, but it’s business as usual.

Energy Transfer Equity rose from the mid $30’s to around $40 per share, and paid a $0.625 quarterly distribution. News for the partnership was good: unitholders overwhelmingly approved the merger with SUG, and Energy Transfer Partners (ETP; not to be confused with ETE) issued new units, which is usually a good thing for an MLP, especially for the General Partner (as explained in my full analysis).

If a person had invested $1,000 in each of the 24 stocks the opening of this index, the total position would be up more than $4,000 after one quarter.

It’s important to note that, although these share prices are up, it’s only a quarterly result. The market as a whole rose, and caused most of this. Increases could be erased next quarter, or they could go up some more. Anybody who is actually holding these shares with a long term time horizon would want, in an ideal case, for revenue, earnings, dividends, and so forth to go up, but for the stock valuations to stay low or go lower. In other words, we want continued business improvement, but as low stock prices as possible. So the fact that all three of the stock prices went up, isn’t necessarily great thing to a long-term investor. Reinvested dividends will buy fewer shares now. I’m not too surprised about the performance of NVS and ETE, but WMT’s spike from around $50 to around $60 was surprising. Completely by chance, my selection of the stock coincided with the very beginning of an atypical stock spike. It hasn’t had a move like that in three years.

You can check with the bloggers involved in the index for further information on their picks.
The Dividend Guy
Dividend Mantra
My Own Advisor
The Passive Income Earner
Dividend Ninja
The Wealthy Canadian
Dividend Growth Investor

A few comments regarding the index:
-The index, as a whole, is up since last quarter, and so is the market as a whole.
-The best pick this quarter was The Wealthy Canadian’s pick of Daylight Energy. Specifically, it announced an agreement to be acquired by Sinopec, which means shareholders of Daylight get a premium for their shares, and the price jumps accordingly. So, he sold the virtual investment, locked in that huge return of value, and put that money towards another pick.
-The Passive Income Earner’s selection of Aflac is working out very well so far. It is a very high quality insurance company that has exposure to European debt, so its valuation dropped to rather irrational levels before the inception of the index. There’s fundamental risk there, but due to a potentially irrationally low price of the stock, a number of dividend blogs identified the company as a value.
-A couple of the picks are down, but not in any huge way.

Full Disclosure: At the time of this writing, I own shares of KO, ETE, NVS, ABT, CVX, MCD, MSFT, and PG.
You can see my portfolio here.

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