Look at these model portfolios and tell me what you think.  

I think they reveal that you can pick stocks using a strict formula or you can invest in a quality ETF and get close to the same results.

But what it really tells me is that you should start as soon as you can.

Consistent investing over time; persistence, duration,  these are the qualities of a well developed income investment portfolio.

Notice that none of these portfolios include reinvesting dividends, or investing the cash created from buy outs or additional income created from covered calls.   

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2012 Dividend Machines versus SDY and VIG

If I were a young man, or woman, I would really consider using a combination of ETF's to save for the future.  Some young people have the time to invest for themselves and others do not.  Some of those who do not have the time use an adviser and do well and others do not.    Advisers are expensive and if you want to save for retirement income I think, as does Ben Stein, that low cost ETF's are the way to go.   

Dividend Machines

Once you get closer to retirement and contemplate replacing your paycheck with investment income,  I would learn how to invest in stocks like Dividend Machines to improve income potential later in life.  This post looks at these three potential investments using my data from 2012.

SDY and VIG

I am impressed that SDY and VIG, two of the best Dividend Income, low cost exchange traded funds are keeping up with Dividend Machine stocks.

This post presents a comparison of 2012 portfolios.   If you had bought 100 shares of all the stocks profiled in this blog as 2012 Dividend Machines, you would have invested about $213,00.    The results of that effort are presented below.

Also presented in the table below are the results of your investing that same amount of money, $213,000. in SDY and VIG low cost ETF's.   

I want to make it clear that if you look up the performance of these two ETF's the returns will not match the data in the table below.   You see that a mutual or ETF's performance as reported on financial sites assumes you invested the whole $213,000 on day one.    I evaluate performance differently. 

I compare the results of your investing the same amount of money in one of these ETF's that you would have invested in a stock that I profiled. 

For instance, if you bought 100 shares of INTC at $28 you would have invested $2,800.  If you invested that same amount of money and bought VIG at $65 per share instead of the INTC you would have invested $2,800 and bought about 43 shares of VIG.   If it were SDY and the price was $66 your would have bought about 42.42 shares of SDY.

In 2012 at the end of the year you would have owned 100 shares of 48 Dividend Machine stocks, or 3,709.428 shares of VIG or 3,796.901 shares of SDY.   The table below compares how your investment performed using capital gain, yield on current value and yield on basis.

You can see that to grow wealth, all three strategies are similar.  But for income, Dividend Machine stocks remain superior.

TheMoneyMadam

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Dividend Machines take on SPDR Dividend ETF symbol (SDY)

This post compares my 2012 Dividend Machine Model Portfolio to SPDR Dividend ETF symbol SDY.   Comparisons presented in the table below include capital gains and dividend income.  





A Simple Metholodgy


During 2012 I used my four Dividend Machine Criteria to select forty eight stocks that qualified as Dividend Machines.

I wanted to compare this group of stocks to the SPDR Dividend  ETF  symbol (SDY.)   So I  recorded the number of shares of SDY I would have bought with each buy of a Dividend Machine.  At the end of 2012, the Dividend Portfolio held 4800 shares of various stocks and  the SPDR portfolio held 3,165.62 share of SDY.


Buy & Hold 

During 2013 no stocks in the 2012 Dividend Machine portfolio were sold or bought; although one stock in the Dividend Machine portfolio had a spin off (ABT spin off of ABBV.)  Dividends were not reinvested.   

Similarly, no shares of the 2012 SDY portfolio were bought, sold or reinvested during 2013.   SDY portfolio declared a greater than typical distribution December 2013.

The point is that both portfolios were bought over 2012 and then I followed their performance in 2013.   The results are presented below.






On every level, the 2012 Dividend Machine Portfolio, which incurred no costs during 2013 performed better than a similar investment in SDY. 

I rest my case.

TheMoneyMadam

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