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:

NOC
GNI
PDLI
UNTD
USMO
DLX
HRB
RTN
MSFT

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

2 comments:

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.