Sunday, March 22, 2015

Deep Dive On Dividends

Deep Dive on Dividends

As my thirty readers know I have been tracking MFI stocks since 2006.  My work has shown that MFI stocks that have a dividend (I have used 2.6% or greater) have outperformed those with a smaller or no dividend.

I decided a couple weeks ago to make an effort to clean up my dividend data.  I only started tracking in an automated in 2010.  Before then, I had actually just gone back and assigned a "0" or a "1" to the dividend flag based on memory.  I have now combed through those 4 years (50 stocks per month x 12 months x 4 years) and tried to get the best dividend number I could.  It involved going though 10-Ks and various websites (I found Dividend Channel to be quite useful).

I also tried to create consistent rules.  If a company has a special dividend, I allow it to be counted for twelve months. If a company has increased it's dividend, I give that higher rate annualized going forward.  I have tried to flag companies that are considered 'dividend stocks" due to one large special dividend (like PPC).  So I can now look at MFI dividend performance including and excluding those stocks.  But I have not flagged as a special dividend stock if they regularly pay special dividends (like PDLI, USMO). I also have not fagged if they would be a dividend stock without the special dividend.

I did find some omissions in the past, stocks that should have been dividend stock, but I had not flagged.  I also found a few cases of the reverse.  Overall, the conclusion is unchanged.  MFI stocks that pay a dividend of 2.6% or greater have done much better than those that don't.  And if you pick MFI stocks with the dividend and a market cap over 600m, results are even better.

But the impact of my study was to bring down the numbers a bit.  I had estimated that 100k invested equally over 12 months in 206 in dividend stocks be worth $458,000.  That amount is now down to a bit over $400,000.  A drop, but still much, much better than the $200,000 you'd have just being in all MFI stocks.

So now that I have cleaned things up, I can begin to think about other variables.  How about dividends bigger or smaller than 2.6%. How about stocks there just because of a "special dividend?.

Stay tuned.

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