Over the last 12 months, a group of 8 financial bloggers have formed and tracked an index of dividend stocks.
We each choose 3 stocks, for a total of 24 stocks in the index.
Dividend Growth Index Returns
|Wealthy Canadian||RY, FTS, BIN||37.0%|
|Dividend Monk||WMT, NVS, ETE||34.0%|
|Dividend Mantra||COP, PM, PG||28.2%|
|Dividend Growth Investor||MCD, EPD, CVX||26.1%|
|The Passive Income Earner||CNR, CNQ, AFL||22.5%|
|My Own Advisor||ABT, BNS, CLC||15.8%|
|The Dividend Guy||INTC, KO, NA||12.0%|
|Dividend Ninja||HSE, PEP, JNJ||10%|
Index 12 Month Returns: 22.2%
The best pick on the list was one of Wealthy Canadian’s, because it was bought out for a huge premium. Oddly, his blog no longer exists, so he has been replaced in the index by Susan Brunner, who holds FTS, TIH, and SAP in the index. Dividend Ninja used to hold SPLS in the index but it was replaced with JNJ after SPLS had a negative report, and the reduction in value is factored into the index.
My three picks apparently had the second best returns out of the group. To be clear, this was just luck for me. With only three picks each, one major piece of good news or bad news can determine a big difference in an investor’s returns. I selected Walmart (WMT), Novartis (NVS), and Energy Transfer Equity (ETE). I don’t make any short term decisions for stock price movements (and a year for me is short term), but I figured Walmart and Novartis would provide reasonable returns while Energy Transfer Equity would provide stronger returns. ETE and NVS met those expectations, whereas Walmart totally blew them away.
Over the last decade, Walmart’s stock was mainly flat. This was not because their performance was flat; they increased EPS and dividends every year for that decade. Rather, WMT stock was considerably overvalued a decade ago, and so the valuation continually decreased while earnings continued increased, resulting in a flat stock price. I determined that the valuation finally got to a point low enough where it was a decent buy and where the valuation should not continue to deteriorate, which implies the stock value should rise at the same rate as EPS.
Now, all sorts of things can happen over the short term, but the numbers made sense for that conclusion for the long term. As it turned out, my timing was extremely lucky for this virtual year, because WMT stock went way up right after I picked it.
Who knows what will happen next year, but it probably won’t repeat itself, and if it does, I’ll likely consider it overvalued. My only expectation is that the companies continue to perform well, and the stock prices can do whatever they want to in the short term but will ultimately follow the performance over the long run.
The list has performed fairly well as a group, and it’s meant to be a cooperative effort. A few picks with bad news have brought down the list and offset some of the biggest gainers, so the index has provided good returns while unfortunately under-performing the S&P 500 for this year.
Nice picks and great results for you so far. As you state, this is just for fun and really just shows short-term results which matter little to a long-term focused strategy.
However, I’m wondering what you think of NVS currently. I’ve looked at it a few times and love the business. The generic business is particularly strong, as it’s #2 in the world behind TEVA last I looked. I’ve only passed due to the annual dividend and foreign withholding I have to reclaim at tax time. Seems like a solid business that’s currently reasonably valued. Thoughts?
It was great when NVS dipped to the low $50’s in the early summer, and it has since gained $10/share or so.
I think it’s reasonably valued currently; not particularly appealing but not overbought in my opinion either. It has diversification, a wide moat, and is one of my few non-US picks.
I don’t mind the annual dividend because my hope is to hold it for a while, and the tax withholding is only a mild issue as long as it’s not in a tax-sheltered account.
I’m kind of bearish on the market overall, since there aren’t many low values out there despite significant macroeconomic headwinds. Uncertainty is fine as long as uncertainty is factored into the valuations, which doesn’t seem to be the case currently. So anything that has a low valuation or a moderate valuation like NVS seems to be okay in my book because there aren’t a lot of other big value opportunities out there.
Living Off Dividends
I owned WMT for the past 18 months and just sold a few weeks ago.
Replaced it with NVS, GOV & ETP.