Dividend Approach - Does It Still Work?

Dividend Approach, Does It Still Work?

Regular readers of my MFI blog know that I have been tracking MFI data for almost 10 years now. One item I have found, since I started tracking in 2006, was that MFI stocks that paid a dividend (I used 2.6% or greater) have out-performed. And if you take a subset of that => those with a larger market cap, they have out performed the outperformance.

So I started four tranches based on that approach last October.  The results have trailed the market by a bit in my 13 months.  I have always had a nagging concern that the out-performance was somewhat correlated to T Bill rates. As  those drop, just naturally larger cap dividend stocks would be more attractive.  And it seemed possible that the reverse might be true as well, when T Bill rates rise, they might be less attractive.

Of course, it is always difficult to separate the sheep from the goats.  Is the recent poor performance just reflective of stocks like CSCO, GME & QCOM have poor earnings, guidance etc? Perhaps nothing to do with macro items like T Bill rates, but rather a bad run that will revert to the mean?

Here is a table showing the past 15 dividend components of my MFI tracking portfolios:

Date	Dividend	R3K	MFI
7/25/2014	7.8%	8.7%	3.3%
8/29/2014	3.3%	1.0%	-2.2%
9/26/2014	11.4%	-0.9%	-0.6%
10/31/2014	2.7%	4.4%	4.3%
11/28/2014	-9.7%	-0.7%	-2.8%
12/31/2014	-10.9%	-0.6%	-3.2%
1/30/2015	-5.2%	2.2%	1.4%
2/27/2015	-12.7%	-3.3%	-8.7%
3/27/2015	-8.7%	-1.9%	-8.2%
4/24/2015	-16.0%	-4.5%	-9.4%
5/29/2015	-13.9%	-4.1%	-12.0%
6/26/2015	-8.0%	-4.2%	-5.5%
7/30/2015	-8.5%	-4.2%	1.8%
8/28/2015	-0.2%	1.3%	5.4%
9/25/2015	-1.0%	4.4%	6.7%
10/30/2015	-0.6%	-2.5%	-0.6%

So a little quick math would show that the 12 open dividend portfolios are down an average of 8.0%, versus -1.5% for R3K and -2.9% for MFI in total.  If we open up the 4/24 tranche, here are the stocks:

Stock	Initial Price	End Price	Percent Change	52 week low	Mkt Cap
BKE	47.16	33.78	-28.4%	32.32	2,308
CLCT	22.20	15.89	-28.4%	11.66	204
CSCO	28.37	27.98	-1.4%	23.03	147,184
EGL	30.24	34.05	12.6%	20.94	532
GME	40.03	45.94	14.8%	31.69	4,384
GORO	3.29	2.24	-31.9%	1.99	183
IQNT	19.01	19.56	2.9%	14.31	648
KING	16.76	17.78	6.1%	11.63	5,396
MSB	15.22	8.29	-45.5%	8.15	200
NATH	46.49	40.74	-12.4%	30.20	209
NSU	3.73	2.80	-24.9%	2.57	763
PBI	22.52	21.27	-5.6%	18.59	4,605
PDLI	6.67	3.94	-41.0%	3.43	1,131
PETS	16.80	16.91	0.7%	13.20	352
PPC	23.62	20.19	-14.5%	17.39	6,118
QCOM	67.20	52.27	-22.2%	49.92	111,436
TSRA	37.96	33.45	-11.9%	30.62	2,029
WILN	2.56	1.10	-57.1%	1.08	320

If you bifurcate by market cap, the smallest 8 are down 19.9%. The larger 8 are down 12.9%.  Of course PDLI is a name I have refused to buy for over a year,  at least I got that one right.

I have to say, to me it feels more like individual stock issues at this point, rather than a macro issue that dividend stocks are like bonds and will drop in value when rates rise or are expected to rise.  I am sticking with the approach - but everyone needs to draw their own conclusions as I am just a guy on a Dell running Windows 10 (just switched to it yesterday).