Historical Dividend Studies

[hendi_alex]

This SA article could be of interest to some of you. I just skimmed it, but tweaked my interest and will read in detail later. The article seems to mostly be discussing classes of stocks that outperform and why.

"Let's start with the more intuitive of the two factors. If you had $1 to invest in the year 1926, and the choice between a portfolio of large-caps or a portfolio of small-caps, ask yourself which you would choose. If you cashed out your investment in 2009, the small-cap portfolio would be worth around $12,971, more than 5 times as much as the large-cap portfolio. In fact, the average yearly return (arithmetic) for small-cap stocks since 1926 was 17.7% compared to the large-cap average of 11.7%. An investor in the small-cap portfolio would have swallowed immense losses at some points in the century, but these losses were more than compensated by aggressive gains at other points. The ends justify the means."

http://seekingalpha.com/article/1923321-...urce=yahoo

[EricL]

(03-07-2014, 04:59 PM)dividendventure Wrote: This is very true, it is part of the reason why I always try to look for small-cap (Between 1 and 2 Billion market cap) that have a good balance sheet, earnings growth and consistent dividend payments and increases around 10 years. Of course these companies are very hard to find, as they have such a potential upside. Since I am based in London, UK stocks are fair game for me, so I've been able to find bargains there. Looking at US listed stocks, I can't seem to find such good small-caps.

A few I own that are under $5B in market cap include CBRL, FLO, MDP, QCOR, THO, and WSO. Someone else also recently mentioned TIS and some others I can think of are GME, RAVN and DAKT.

[Robandcindy2]

(03-07-2014, 01:26 PM)dividendventure Wrote: This matter is one of the things I still didn't fully settle on. What would be a better strategy on average: Start investing early on dividend stocks or invest in index funds and later on move the capital to dividend payment stocks?

Essentially, in the accumulation phase where you re-invest all the dividends, there is no actual income. So, all that matters is the capital growth you achieve. So, won't an index fund grow more per year than the average dividend stock (even including dividend re-investment) ?

I can't seem to find a concrete answer to this question, which might mean there isn't one and depending on the time frame or on the dividend stocks picked, the results can swing either way.

There are two parts to this dilemma:

The first part deals with your comfort level as an investor. Are you willing, have the time, etc. to: devise an investment strategy for your family? Research/screen the applicable stocks for your plan? Purchase them at the appropriate time based on valuations? Monitor this portfolio at least weekly with an eye to the overall market daily?

If not, then Index investing (and I recommend the Lazy Portfolio or Couch Potato method) is the way to go reinvesting dividends and cap. gains. Or build a portfolio of quality ETF's that focus on Dividends. Personally, I'd rather "pay myself" the Expense Ratio and own the stocks (as long as it doesn't get in the way of softball ).

If you are young and starting out you could slowly build a dividend portfolio using SDY or VYM or HDV or DVY in a low cost brokerage IRA such as Vanguard. Then as your assets accumulated sell some and start purchasing the DG Companies YOU want to OWN. When you think of yourself as a Junior Buffett, buying individual companies is easier.

The second aspect deals with market cycles. At times growth is King. At times Value is King. But a picture is worth a thousand words (if this works). Here is the S&P 500 Index vs. two "darlings" of the dividend world: PG & JNJ:



Over the last decade these PG and JNJ have pretty much been the leaders.

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There are many terrific articles on this subject. I can't seem to find the one that got my attention years ago. However, during my research I came across this gem:

40 Dividend Champs Vs. The S&P 500-30 Year Back Test

This is amazing especially considering some of the stock choices. Worth the time to read this short article.

(Sorry the image is so large)

[Be Here Now]

I found another interesting dividend study:

http://www.globalxfunds.com/insights/Div...-12-13.pdf