Running_Man
Thinks s/he gets paid by the post
- Joined
- Sep 25, 2006
- Messages
- 2,844
In November 2008 there was a thread requesting 10 stocks for a Dividend Portfolio.
http://www.early-retirement.org/forums/f28/help-me-build-a-dividend-stock-portfolio-40236.html
Near all time highs in the market it is good to review what you were thinking and how right or wrong your thoughts were at the time so that you can review if your ideas work as well as you think they should. At the time the S&P500 was at 968 and this was before the last leg down which dropped to around 680 in March 2009.
The 10 stocks I recommended consisted of 2 groups, 6 stocks taken from the DJIA for dividend stocks yielding fairly well with a Value Line top rating for safety, and having good dividend growth prospects they were : KO MCD HD JNJ T MSFT and this was to be 80% of the portfolio. The other 4 stocks were more risky and to be 20% of the portfolio FUN WRE ABX ITW.
Results? A portfolio of $250,000 in vested in the 10 stocks recommended on Nov 1, 2008 would have a value of $619,312 today. This would have been an investment of $33,333 in each of the 6 Dow Stocks selected and $12,500 in the more speculative grade stocks. An SPY ETF with a $250,000 investment on 11/1/2008 is worth $557,915 today. However the 10 stock portfolio started out with a total portfolio dividend in the prior 12 months of $9,446 in 2008 and increasing at an annual rate of 8.1% per year to $17,677 over the last 12 months. SPY would have equivalent dividends of $7,174 and $11,295 with a dividend growth rate of 5.8%.
Of the stocks selected one did poorly in the DOW group — T growth here never occurred though the dividend was not cut and grew at a compound annual rate of 2.3% over the period, which does exceed inflation but not meeting the investment goal. MCD, HD and MSFT all grew their dividends at an annual compound rate between 11.5 and 16 percent. Considering these are stodgy old Dow Jones stocks selected at the time shows the power of investing in stocks with solid dividends with good growth prospects.
In the more speculative group two stocks were bad picks ABX which was more for exposure to gold in case of further financial turmoil in the markets and WRE which cut it’s dividend in 2012 and has been very slow to recover. FUN is a mixed picture as it cut it’s dividend in 2009 as the recession hit the amusement park hard but it has since rebounded with the economy greatly, more than tripling the original investment.
More important to me as an income investor, the 10 stock portfolio started with an advantage in dividends of $2,272 per year in 2008 and grew that to an advantage of $6,381 in the last 12 months. Over the nearly 8 years there was more than 32K in extra dividends to spend from the 10 stock portfolio than the SPY portfolio.
The lesson I learned was consider the safety of the dividend for all stocks purchased. I was reaching at the time in order to pull the entire portfolio up to a 4 percent yield. Fortunately I knew enough to limit the positions in the portfolio.
For some of the other portfolio’s Cycling Investors was divided evenly into 10 stocks of 25K each EMR GE ITW JNJ KIM KO MMM PG SYY WRE and at this point has a value of $470,730 and dividends starting at $10,522 and ending at $13,170 a compound growth rate of 2.8 percent for the income provided. Investments in GE KIM and WRE all were impacted most seriously by the continuation of the bear market into 2009 and have had trouble recovering.
Hamlet’s suggested portfolio was MO USB PG GE KO O NUE JNJ MMM MSFT, had the good choices of O instead of WRE and MO instead of FUN that I had but was impeded by GE USB and NUE. Portfolio has an ending value of $520,038 and had the highest starting income of $11,405 and an ending income of $15,622 a compound growth rate of 4.1%. Hamlet’s portfolio could have been far better had he avoided USB bank, which was in risk but a popular choice as strong at the time, GE which was in the same boat and NUE - Nucor which had already cut their dividend in 2007 and I would avoid companies for dividend income that have recently cut dividends.
All of this does show, even though the market was to fall 35% in 5 months from this point a long term look at buying even if early can be very profitable over a longer point of time.
http://www.early-retirement.org/forums/f28/help-me-build-a-dividend-stock-portfolio-40236.html
Near all time highs in the market it is good to review what you were thinking and how right or wrong your thoughts were at the time so that you can review if your ideas work as well as you think they should. At the time the S&P500 was at 968 and this was before the last leg down which dropped to around 680 in March 2009.
The 10 stocks I recommended consisted of 2 groups, 6 stocks taken from the DJIA for dividend stocks yielding fairly well with a Value Line top rating for safety, and having good dividend growth prospects they were : KO MCD HD JNJ T MSFT and this was to be 80% of the portfolio. The other 4 stocks were more risky and to be 20% of the portfolio FUN WRE ABX ITW.
Results? A portfolio of $250,000 in vested in the 10 stocks recommended on Nov 1, 2008 would have a value of $619,312 today. This would have been an investment of $33,333 in each of the 6 Dow Stocks selected and $12,500 in the more speculative grade stocks. An SPY ETF with a $250,000 investment on 11/1/2008 is worth $557,915 today. However the 10 stock portfolio started out with a total portfolio dividend in the prior 12 months of $9,446 in 2008 and increasing at an annual rate of 8.1% per year to $17,677 over the last 12 months. SPY would have equivalent dividends of $7,174 and $11,295 with a dividend growth rate of 5.8%.
Of the stocks selected one did poorly in the DOW group — T growth here never occurred though the dividend was not cut and grew at a compound annual rate of 2.3% over the period, which does exceed inflation but not meeting the investment goal. MCD, HD and MSFT all grew their dividends at an annual compound rate between 11.5 and 16 percent. Considering these are stodgy old Dow Jones stocks selected at the time shows the power of investing in stocks with solid dividends with good growth prospects.
In the more speculative group two stocks were bad picks ABX which was more for exposure to gold in case of further financial turmoil in the markets and WRE which cut it’s dividend in 2012 and has been very slow to recover. FUN is a mixed picture as it cut it’s dividend in 2009 as the recession hit the amusement park hard but it has since rebounded with the economy greatly, more than tripling the original investment.
More important to me as an income investor, the 10 stock portfolio started with an advantage in dividends of $2,272 per year in 2008 and grew that to an advantage of $6,381 in the last 12 months. Over the nearly 8 years there was more than 32K in extra dividends to spend from the 10 stock portfolio than the SPY portfolio.
The lesson I learned was consider the safety of the dividend for all stocks purchased. I was reaching at the time in order to pull the entire portfolio up to a 4 percent yield. Fortunately I knew enough to limit the positions in the portfolio.
For some of the other portfolio’s Cycling Investors was divided evenly into 10 stocks of 25K each EMR GE ITW JNJ KIM KO MMM PG SYY WRE and at this point has a value of $470,730 and dividends starting at $10,522 and ending at $13,170 a compound growth rate of 2.8 percent for the income provided. Investments in GE KIM and WRE all were impacted most seriously by the continuation of the bear market into 2009 and have had trouble recovering.
Hamlet’s suggested portfolio was MO USB PG GE KO O NUE JNJ MMM MSFT, had the good choices of O instead of WRE and MO instead of FUN that I had but was impeded by GE USB and NUE. Portfolio has an ending value of $520,038 and had the highest starting income of $11,405 and an ending income of $15,622 a compound growth rate of 4.1%. Hamlet’s portfolio could have been far better had he avoided USB bank, which was in risk but a popular choice as strong at the time, GE which was in the same boat and NUE - Nucor which had already cut their dividend in 2007 and I would avoid companies for dividend income that have recently cut dividends.
All of this does show, even though the market was to fall 35% in 5 months from this point a long term look at buying even if early can be very profitable over a longer point of time.