Officially, it’s been 1 year now since we started the Dividend Growth Index [1]. This group project was initiated last year to build a dividend growth portfolio. We are eight dividend bloggers who manage three dividend stocks each. We are allowed to make any transactions we want as long as we announce them (so you can follow the Dividend Growth Index on our blogs). We could also pick stocks amongst Canadian dividend payers [2] and American stocks [3]. It’s not a stock picking competition, our goal is to provide an example of how dividend growth stocks can generate a solid investment strategy. While we all provide the portfolio’s update on each blog, we also discuss our picks on a quarterly basis. So I’ll start with mine:
Dividend Growth Stock #1: Intel (INTC)
Everything was going well for Intel this year until we hit August and the company started to discuss Q3 and 2012 end of year revenue guidance. Here’s the result of this announcement in one image:
The original revenue guidance for QE3 2012 was $13.8G to $14.2G. Intel revised this number to $13.2G while analysts were expecting $14.2G. Don’t look anywhere else to explain why the stock has plummeted in such a short period of time. The revised revenues were due to a tougher economy than anticipated. It seems very hard to escape this slow economy!
In terms of dividend growth, INTC increased its dividend last quarter and recently announced their December payout at $22.5 cents per share. The dividend payout ratio seems quite low (under 50%) and the company is in good shape regardless of the “not-so-good” quarter ahead.
Intel is making one more step to enter in the Smartphone chipmaker war with their “intel inside” sticker on Smartphones that were recently distributed in UK, India and Russia. They are trying to replicate the famous sticker branding success they had with PC in the 90s. Intel has also developed a new chip (Atom processor) to work with Microsoft Windows 8 software for tablets. They are still lagging to enter into both markets while their computer processor sales may stagnate for the upcoming years.
I’m confident to see Intel continue to grow and pay a healthy dividend. It has become one solid dividend growth stock among the techno industry [5].
If you want to learn more about Intel, you can read my INTC Stock Analysis [6].
Dividend Growth Stock #2: Coca-Cola (KO)
The biggest news related to Coca-Cola during the last quarter was its stock split that happened in August. As you can see in the graph below, this wasn’t the most popular move to push the stock higher:
[4]
Nonetheless, KO has been a good performer in 2012 so far due to its consistency. It has actually beat analyst estimates over the last quarter and continues a steady dividend payout. We expect to see some dividend growth from KO in the near future as the company can afford dividend increases for the joy of its investors.
I’m a big fan of diversification and I consider KO to be more diversified than a balanced mutual fund! It is present in so many countries and has such important branding that KO will continue to do well in the index.
If you want to learn more about Coca-Cola, you can read my KO Stock Analysis [7].
Dividend Growth Stock #3: National Bank of Canada (NA)
National Bank has been performing well throughout the year with constant profit increases while beating analysts’ expectations each time as a bonus. The stock graph doesn’t show how well NA has been doing actually:
[4]
So what went wrong? I guess NA is the victim of a bigger movement in the industry. In fact, NA is the smallest of the big 6 banks in Canada. It is more known as a super-regional bank as most of their assets are in Quebec (one of the 10 provinces in Canada). If you look at the industry as a whole, all Canadian Banks dropped over the summer;
[4]
The dropped has been suffered by many while all banks seem to be coming back in positive territory for the end of the year. National Bank was the only bank in Canada to not increase its dividend during the last quarter. Mind you, they were the first to increase their dividend back in May. For the past 4 quarters, they have beaten analysts’ expectations and seem to be on a roll to continue.
Housing in Canada seems to be a major concern at the moment (read about Canada’s housing bubble here [8]). The good news is that NA is one of the least present banks in the mortgage industry in Toronto, Vancouver and Calgary. Most analysts expect to see some trouble in these areas and TD and CIBC will most likely be the most hit by this “potential” bubble. National Bank is a strong dividend payer in Canada and should remain among the best Canadian dividend stocks [2] for 2012.
If you want to learn more about National Bank, you can read my NA Stock Analysis [9].
Dividend Growth Index Results for Q3
Here’s the result per blogger for the dividend growth (since inception + YTD returns).
Blogger Stock #Shares-Sept 30 New Price Value Inception Return (30 sept 2011) YTD Return
My Own Advisor ABT US $20.23 68.56 $1,386.77 US 38.7% 23.9%
BNS CN $19.77 53.92 $1,065.82 CN 6.6% 7.8%
CLC CN $114.85 8.9 $1,022.18 CN 2.2% -2.9%
The Dividend Guy Blog INTC US $48.41 22.655 $1,096.77 US 9.7% -5.5%
KO US $30.45 37.93 $1,154.79 US 15.5% 10.5%
NA CN $14.91 74.4 $1,109.11 CN 10.9% 4.9%
The Dividend Monk ETE US $30.57 45.2 $1,381.91 US 38.2% 16.6%
NVS US $19.26 61.26 $1,179.87 US 18.0% 13.1%
WMT US $19.76 73.8 $1,457.93 US 45.8% 24.6%
Dividend Ninja HSE CN $46.24 26.42 $1,221.78 CN 22.2% 10.1%
PEP US $16.67 70.77 $1,180.04 US 18.0% 9.1%
SPLS US $- 11.52 $- US N/A N/A
JNJ US $13.04 68.91 $898.51 N/A N/A
Passive Income Earner CNR CN $14.54 86.99 $1,264.91 CN 26.5% 10.7%
CNQ CN $32.92 30.33 $998.40 CN -0.2% -23.1%
AFL US $29.45 47.88 $1,410.15 US 41.0% 9.0%
SPBrunner FTS CN $40.25 33.53 $1,349.46 CN N/A N/A
TIH CN $59.02 20.88 $1,232.32 CN N/A N/A
SAP CN $30.58 42.25 $1,292.17 CN N/A N/A
Dividend Mantra COP US $21.27 57.18 $1,216.00 US 21.6% 2.8%
PM US $16.64 89.94 $1,496.20 US 49.6% 17.4%
PG US $16.36 69.36 $1,134.77 US 13.5% 6.4%
DividendGrowth Investor CVX US $11.16 116.56 $1,300.64 US 30.1% 8.2%
MCD US $11.74 91.75 $1,077.32 US 7.7% -5.0%
EPD US $26.20 53.6 $1,404.20 US 40.4% 19.2%
$29,332.01 22.2% 6.6%
Index XIU 8.68% 5.39%
XDV 7.07% 3.89%
SPY 29.93% 16.43%
VIG 25.08% 10.92%
Click on each blogger to learn more about their dividend growth stocks:
My Own Advisor [10]
Dividend Monk [11]
Dividend Ninja [12]
SP Brunner [14] (new addition in replacement to Wealthy Canadian!)
Dividend Mantra [15]
*note that on August 15th, we sold SPLS and bought JNJ. This was a move made by Dividend Ninja.
Dividend Growth Index Vs The Stock Market
In order to make a true comparison, we have to consider that 62.5% (15 stocks out of 24) are US and the rest is Canadian. If we consider the stock market as a whole, we can compare our dividend growth index to SPY (Tracking the S&P 500) + XIU (Tracking the TSX60). Here are the results:
Dividend Growth Index: 22.2% since inception (Sept 30th 2011) / 5.7% ytd
XIU: 8.68% (Sept 30th 2011) / 5.39% ytd
SPY: 29.93% / 16.43%
If we make the average for SPY & XIU we get 21.97% since September 2011 and 12.29% ytd. So over the past 12 months, we are beating the index by a very small margin but we take are taking a serious beating this year compared to the whole market.
I’ve made the same comparison with VIG (tracking dividend stocks) & XDV (tracking Canadian dividend stocks). Here are the results:
Dividend Growth Index: 22.2% since inception (Sept 30th 2011) / 5.7% ytd
XDV: 7.07% (Sept 30th 2011) / 3.89% ytd
VIG: 25.08% / 10.92%
Combined: 18.33% / 8.28%
Here again, we get a similar result where our 1 year track record is much better than this year to date. But you can see that the ordinary stocks surged higher than dividend stocks this year. The US market has been pretty much on an uptrend the whole year and that explains a lot. Dividend stocks are expected to perform less than the rest of the market in a “bull environment”. It’s kind of funny as most investors are pretty negative and nervous about the market but the index is still up by 16% this year which is awesome. I guess we simply have not yet healed from our 2008 wounds!
In my latest book; Dividend Growth: Freedom through Passive Income [17], I explain how to use ratios and free stock screener to start your journey into dividend investing. You will also learn how to invest in both Canadian and US stocks without being penalized by currency changes and withholding taxes. Check out my book now and let me know what you think! [17]
US Edition [18] |
Canadian Edition [19] |
|
 [18]Click here to Download |
 [19] Click Here to Download [19] |
Cheers,
Mike.
Disclaimer: I hold positions in BNS, INTC, KO, NA, HSE, JNJ, CVX
Google+ [20]