Wednesday, January 25, 2012

Paying Dividends

I have written frequently about how a combination of MFI stocks that have at least a 2.6% dividend yield have vastly outperformed everything since 2006. With my open tracking portfolios, this continues to be the trend. They are winning 9 of the 12 open portfolios versus the Russell 3000 and they are winning 10 of 12 against the broader MFI.

PETS was the most recent dividend stock to shoot up, over a 10% pop post solid earnings that saw revenues (finally) increase (PetMed Express beats by $0.03, beats on revs).

September 30th MFI Dividend Portfolio

I thought readers might like to see how a dividend portfolio is performing. Here is a listing of September 30th, that is up a composite 24%, despite a dismal CHKE:

Stock Initial Price End Price Percent Change Mkt Cap
STRA 75.85 116.62 54% 935
MDP 22.32 32.48 46% 1,041
PETS 8.89 12.62 42% 195
KLAC 38.00 51.26 35% 6,523
HRB 13.13 16.87 28% 4,198
DLX 18.39 23.42 27% 995
LPS 13.61 16.56 22% 1,205
AMAT 10.29 12.31 20% 13,992
MSFT 24.70 29.34 19% 213,169
PDLI 5.42 6.36 17% 807
CMTL 27.59 30.50 11% 684
USMO 12.97 14.22 10% 303
CHKE 12.64 10.42 -18% 112

Of course, one of the ironies about the MFI Dividend stocks is that while I would humbly suggest I am the person that has highlighted the out-performance, I personally have not benefited. Why is that?

I have been buying MFI dividend stocks for the past two or three years. Sadly, the ones I have picked have generally underperformed.

CHKE - poor
UNTD - poor
MNDO - poor
CEL - poor
PETS - poor
RTN - ok
MSFT - ok
CMTL - ok
INTC - good
PM - good
RAI - good
STRA - good
RGR - good

What does this mean?
I'd humbly suggest it means I am a lousy stock picker.

What should I do? I am tempted to get back into MFI, but purely on the dividend side and purely mechanically. I have mentioned that I will be obtaining some funds at the end of February. Perhaps I will simply make a listing of MFI stocks at the end of February that qualify as dividend stocks and buy a basket.

If I were to do it today, these are the stocks I would buy:


I would definitely have to hold my nose on a couple of these. But that is why they call it mechanical. We'll see.


AndrewsDad said...

Any thoughts on also looking at market cap? Using your list, which is obviously am extremely small sample set, the 4 with the worst returns are in the bottom 5 in market cap. The reason I am mentioning this is I have seen something similar in my extremely small data set, small caps with decent dividends do not seem to performed as well.

Marsh_Gerda said...

AD - I have seen the same thing - small divvy stocks seem to lag. Not sure why, I guess their cash flow is less certain.