Yesterday I published a post where I referenced an article by Bespoke Investment Group. During this season of reflection of the past year and anticipation of the one to come – aka goal setting – I figured further analysis of their article and its relationship to the DGI community might be warranted.
First I need to address the caveats:
- Only publicly disclosed data culled from portfolios in my Blog Directory were used. If your blog is not listed, your data was not included.
- My data only reflects a snapshot in time. Once entered in my database I generally make no updates.
- I make no guaranty as to the accuracy of the data either through input errors, processing errors, or the legitimacy of the source data. Meaning, use at your own risk – or you get what you pay for.
This article will be published in two parts, 2015: What Went Right and 2015: What Went Wrong.
Bespoke’s article raised a number of questions in my mind. Although not specifically targeted to the DGI community, I found it to be timely none-the-less. Foremost question – why were so many ‘winners’ missing from DGI portfolios?
First I looked at the FANG (Facebook, Amazon, Netflix, Google) stocks. Although non-dividend payers, all four made the Top 40 list and were in several portfolios – although no portfolio held all four. A shout-out has to go to Flight To Dividends for having the only Non-FANG, Non-Dividend paying, Top 40 stock – MNST (although his blog is currently dormant).
As most screens have Yield as a component, I used the most common threshold – 2% The Dividend Diplomats are in the process of tweaking their screen, but assuming a 2% minimum would eliminate such widely held Top 40’s like NKE (10), Chubb (8) and SBUX (29).
Let me illustrate with one of my own examples. Total Systems Services came in #8 on the top 40 list. I opened a position on January 6, 2015. My investment thesis was that payment processors would get a lift with the Apple Pay rollout. By any measure, TSS would miss most screens as its’ yield at purchase was 1.1%. Also, no increase in the dividend since 2011. Today if you were to buy you could lock in a whopping yield of .78%. But my total return (price appreciation plus dividends) is 41.28%. To maintain your sanity (and perspective), when lower yielding securities are incorporated into a DGI portfolio the Total Return metric should be used as well.
The 123 portfolios with MCD (3% yld) have plenty to be happy about as well as the 19 with DPS (2.1%), 8 RAI (3.2%), 4 VLO (2.8%) and 3 PSA (2.7%). All were in the Top 40 and attractive current yield (%).