Summary 2011 Dividend Machines
Dividend Machine is the name I give a stock that
meets four basic criteria. During the
past year, I profiled fifty two stocks, one per week. Each stock profiled met all four criteria at
the time I wrote about the company.
This group of fifty two stocks is my 2011 DIVIDEND
MACHINE PORTFOLIO. In this post, I
provide a review of the 2011 Dividend Machine Portfolio. In the future, I will follow this portfolio
and periodically report on the performance.
Four
Dividend Machine Criteria:
- Pay at least a three percent dividend
- Earn more than the dividend payout
- Increased the dividend every year for at least five years
- Debt to equity (D/E ratio) 1 or less or not greater than the industry average
Characteristics
of the fifty two 2011 Dividend Machines:
This theoretical portfolio is based on buying 100
shares each of fifty two stocks. I
selected one stock per week that met all four criteria without regard to any
other factor such as price earnings ratio, recent news, or need for diversification. You can see a list of these stocks and review
the post describing them by clicking on the 2011 portfolio page at the top of
this blog.
- Amount invested = $207,118
- Price range = $9.27 - $93.37
- Average Dividend yield = 4%
- Average payout ratio (dividend/earnings) = $52.49%
Industry
Diversification:
Although I did not try to create a portfolio with
industry diversification in mind, I was surprised to find the degree of
diversification this selection technique created.
- Nine Utilities
- Six Processed & Packaged Goods including Personal Products
- Five Electronics
- Four Oil, gas or chemicals
- Four Machinery & Manufacturing
- Four Financials – banks, asset management, insurers
- Three Telecommunications
- Three Medical instrumentation & supplies
- Three Aerospace
- Two Pharmaceuticals
- Two Waste Management
- Seven Other individual industries
Diversification
by Market Capitalization:
Similarly, I did not try to select these stocks
based on small cap. or big cap. and again,
I was surprised by the level of diversification this technique produced.
- Thirteen small cap. companies (up to 2 billion)
- Sixteen mid cap. companies (2-10 billion)
- Sixteen large cap. companies (10-100 billion)
- Seven mega cap. companies (greater than 200 billion)
Performance
and other events:
Using closing prices on 12/23/2011,
the 2011 dividend machine portfolio posted a $16,676 gain for an 8.05% gain. The portfolio earns
$15,819; these stocks pay out $8,300 in dividends based on the most recent
quarterly dividend. Other events are
provided below.
- Five stocks no longer qualify as a dividend machine because they used special dividends to create increased dividends instead of providing a steady annual increase.
- Twenty nine companies have already increased their dividend
- Eleven companies will have to increase their next quarter dividend or they will violate the requirement of increasing every year.
- Two companies no longer pay a 3 percent dividend yield due to price appreciation: Travelers (TRV) and Harleysville Group (HGIC)
- Three companies no longer qualify because their D/E ratio is greater than one or greater than the industry standard. Lockheed Martin (LMT) D/E 2.39, General Mills (GIS) and Hasbro (HAS). The remaining 49 companies have acceptable D/E ratios.
I will keep this portfolio intact and follow its performance
for as long as I write this blog. My
preliminary opinion is that using these four criteria to select a portfolio of
dividend stocks is an easy way to build a diversified income portfolio of
dividend stocks.
TheMoneyMadam
