Actual Dividend Growth Portfolio

[gonelong]

Might be a good idea to bump this and check in.

Money market type funds can be found right now that are paying 5 percent yields so keep that in mind.

But several lagging stocks are paying high yields….I noticed 3M at 6%, Verizon at 7% to name a couple.

Any thoughts?

I picked up some CDs at 5.1%. I sold MMM long ago and am not interested in them at this point. I need to see that they have made strides to right the ship before I jump in. MMM is likely to fall further IMO.

[Dave C]

interesting thread.... This is somewhat up my alley. I won't go into everything I've done in my career but coding for a quantitative investment house is one of them.

High dividend and rising dividend stocks from the 20's through the mid 90's were the way to go without a doubt. Easy money, computer based trading and high frequency trading (making thousands of trades a second) have favored mega-cap and highly liquid (and predictable) stocks at the expense of the more stable businesses that pay increasing dividends.

Having built models (coded data queries) for over 12 years and seeing how the markets work currently I'd say it's hard to beat the market the way you would have 50 years ago with this investing path. High dividend payers were the least volatile part of the market for 70 years however in recent years have become one of the more volatile. This largely believed to be due to the near zero yield of cash or cash-like investments. A quant approach has been to flip stocks that pay quarterly with those that pay bi-annually back and forth to increase overall yield while creating churn inside the vehicle. That has effected this market segment quite a bit.

That said, one place that has always been overlooked is the so called Small Value stock side of things. Inefficient and under analyzed while paying the highest dividends on average. They don't make into the "rising" dividend universe much as they typically have shorter track records. Small Value has been the place to be for the better part of 3 years now. It's cooled recently however still far undervalued in a fundamental aspect. Small value over 40 years is still the winner of market segments.

Long term vs short term is the key. High frequency trading and the massive explosion of derivatives on index funds make short term trading a losing game for anyone not "inside" the system. The cyclical nature of the derivative expiration cycle pushes and pulls the market more than anything else these days. The entire market is leveraged to the tune of about 11X on any given day... again, this is to create yield (selling calls for instance) because interest rates have been so low.

My personal $$ has been in a diversified portfolio that is outside the norm a little.... I look at volatility, the waves of it are cyclical and somewhat predictable over market cycles. Moving with the waves and not against them... Money moves in circles these days. Fundamental investors who buy and hold can do well but that isn't how the "houses" invest any longer. Sure there are shops out there finding hidden gems but the index players rule the day along with the derivative investors controlling $100K of stock with $1K.

[Dave C]

Interesting to bump this again and ask how people are doing. Yes, interest rates have risen and you can find yields north of 5%... real inflation (not the stuff the BLS/government) talks about is north of 12% when you account for taxes, energy, housing and food. I won't go deep into but the BLS has altered their calculations for Inflation and GDP so many times they are meaningless in historical terms. If you used the inflation calculation they used in the last 70's it would be over 15% right now for example. Unemployment would be around 12% and so on.

In the aggregate, investing in typical vehicles hasn't yielded any real growth when compared to inflation for 95% of the investors. Sure, you can make 12 to 15% with acceptable risk but not many do when you look at how they enter and leave the markets.

To the OP's original discussion. The "Dividend Growth" approach has had a couple of rough years in relation to the general indexes. Up, but lagging. My guess that is that we will see interest rates fall this year going into the election and that might put further pressure on the stable dividend growers as flows will tend to favor the fast growers again. I'm currently hedged that way.