Dividend Growth Index 2012 Q1

Six months ago in September 2011, several dividend bloggers created a Dividend Growth Index of 24 companies. Eight members each chose three investments.

My three picks were Walmart (WMT), Novartis (NVS), and Energy Transfer Equity (ETE).

In the last 6 months, Walmart is up from around $52 to over $60 and has paid out over $0.75 worth of dividends in the period. Novartis has been flat, although a nice dividend of over 4% has been received, which is paid out annually. Energy Transfer Equity has gone up from under $35 to over $41, while also paying out $1.25 in distributions along the way.

There aren’t many updates on my three picks. Dividend growth investing, at its best, is like watching paint dry. “No news” is good news. That being said, ETE completed its merger with Southern Union, which diversifies their assets and income, is particularly good for their MLP structure, and is one of the reasons why I picked them. So that’s good news.

It should be cautioned that much of the price appreciation in these picks was due to an increase in the general market. Based on metrics like Capitalization/GDP and the Shiller P/E, the market is moderately overvalued compared to its historic average. Caution and prudent valuation methodology is advised for current stock picks.

Here are links to the other members in the Dividend Growth Index, so you can see how their stocks are doing.

The Dividend Guy
Dividend Growth Investor
My Own Advisor
Wealthy Canadian (Inactive?)
The Dividend Ninja
Dividend Mantra
The Passive Income Earner

Full Disclosure: I am long ETE and NVS. You can see my dividend portfolio here.

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  1. I really feel like Walmart will be one of the best dividend growth stocks going forward, in so far as increasing its dividend each year. The Walton family is what really confirms that thesis for me; they’re all still heavily invested and have a lot to gain from improving dividends each year. Besides, Walmart’s best growth days are certainly behind them.

    I think it was Business Week that published an article in the most recent edition about how Walmart is struggling with online sales. That remains my #1 fear with retail stocks – it’s only a matter of time before the internet does it better, cheaper, and solidifies a “moat” around online shopping. Amazon arguably has a moat in online retail.

    I know we diverge on dividends – I’m more of a fan of share repurchases – but if Walmart were to up its dividend and kill off repurchases, I think it’d be a much better investment. I just can’t see how they maintain an edge in retail forever. Personally, I don’t think they will ever match Amazon in online retail, and offline I think Aldi has a much better business model for the single source of domestic growth: smaller stores.

    Any reason you haven’t purchased WMT? Is it growth and total return, or concern about the business model?

    • I haven’t purchased WMT mainly just due to opportunity costs; there have been other investments I’ve bought instead. I do like Costco and Amazon better (but not at their valuations). Walmart is very consistent, and I wouldn’t be disappointed to own the stock, but the jump from $50/share to $60/share makes it less attractively valued, especially in terms of its free cash flow multiple.

      Walmart is one of the few companies that does a decent job of share repurchases, since at least they buy them consistently rather than mainly just during market tops.


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