Dividend Kings

[Norman Bernstein]

Here's a minor observation, for the very few people who might be interested.

Dividend Kings are corporations who have paid dividends for at least 50 years without interruption; they are companies with strong brands and profitable businesses, sufficient to devote a percentage of profits as a direct return to shareholders. These are not 'growth' companies, in the sense that investors would expect them to increase their share prices commensurate with the S&P 500... although it is also not true that they don't grow. The sum of their growth and dividends, by some analyses, has vastly outstripped the overall performance of the market for long periods of time.

Just for laughs, I took a look at the list of dividend kings, sorted by the size of their dividends. About 3/4 of the top 17 on the list are VERY recognizable names (IBM, Clorox, 3M, etc.) The average yield of the top 17 on the list, all of whom pay dividends of at least 3%, is actually 3.85%.

In light of the current market downturn, those lucky enough to have preserved some cash might find the list interesting. Just google 'dividend kings list'.

[leikec]

The only dividend stock I’ve held for any length of time is MPW, which has done very well for me. I bought 200 shares a few years ago at an average price of $13.75 and it worked out well. I ended up selling 100 shares when the stock briefly hit $24.00, but I intend to hold on to the other 100 shares for a long time. It’s currently paying over 6%, and I hope it will get up past the $20.00 mark again soon.

I’m strictly a small timer when it comes to investments…


Jeff C

[switters]

Downloading the spreadsheet now, thanks.

[Canoez]

Dividend aristocrats are part of my strategy. So far, so good.

[Too Little Time]

A bit less than my usual comments.

https://www.fool.com/investing/stock...ividend-kings/

Dividend Kings aren't necessarily a good fit for every investor. Many of these stocks frequently deliver relatively low growth. For example, four of the five Dividend Kings with the longest records of dividend increases have underperformed the S&P 500 over the past 10 years.

[WI-Tom]

Hmm... "A bit less than your usual comments"? Maybe that's because you forgot to include the next paragraph from The Motley Fool:

However, Dividend Kings can be a great component of retirement portfolios. Most of these stocks offer dividend yields that are higher than the average dividend yield of S&P 500 members. Their consistency in paying and increasing dividend payouts also can provide a measure of confidence for retirees who are depending on income generated by the dividend stocks they own.

I believe that bolded bit is Norman's main point about these stocks.

Tom

[Too Little Time]

Hmm... "A bit less than your usual comments"? Maybe that's because you forgot to include the next paragraph from The Motley Fool:



I believe that bolded bit is Norman's main point about these stocks.

My usual comment is that total return is the appropriate measure.

I made a more extensive comment when Norman made a comment about the performance of his portfolio recently. He was proud of the last 4 or 5 months compared to the S&P 500. He failed to compare to the broad market. Or the longer term.

At that time I said the S&P500 has up 66% since Jan 1 2019. Comparing that to the 38% that a 10% annualized return would yield, puts one up almost 30% from what one would expect. Life is really good even when entering a bear market.

IBM is up 10% since start of '19 plus the 4% dividend.
Clorox is down since the start of '19.
3M is down since the start of '19.

Those are the stocks Norman mentioned that give one "a measure of confidence". Sure.


Regardless of time period I pick, I am sure someone will make a claim of cherry picking the date. Having said that, they were poor investments for a long time. (IBM is flat this year, the other 2 are down 20%.)

[leikec]

^^^^^ How does anyone manage to travel with him on a long trip when his self-satisfaction takes up all of the trunk space?

Jeff C

[Norman Bernstein]

Snort…

[Norman Bernstein]

Google “Why Dividends Matter”, a report by Morgan Stanley….

….in which, you’ll discover that from 1991 to 2015, dividend stocks returned more than twice the annual return than non-dividend- paying stocks… and more recent, similar analyses (although I can’t find them at the moment) show even more dramatic performance. Lots of good information in the article.

And WI-Tom, you nailed it. Specifically for retirees living on the proceeds of their lifetime of investments, those collecting dividends can ignore market turn-downs…. While those expecting to annually liquidate their investments to cover their retirement expenses, will be doing so at depressed prices. “Total return”, for a retiree, is the dumbest, most brain-dead metric one could possibly use… unless they enjoy selling off stocks after they have dropped substantially.

[Too Little Time]

Google “Why Dividends Matter”, a report by Morgan Stanley….

….in which, you’ll discover that from 1991 to 2015, dividend stocks returned more than twice the annual return than non-dividend- paying stocks… and more recent, similar analyses (although I can’t find them at the moment) show even more dramatic performance. Lots of good information in the article.

And WI-Tom, you nailed it. Specifically for retirees living on the proceeds of their lifetime of investments, those collecting dividends can ignore market turn-downs…. While those expecting to annually liquidate their investments to cover their retirement expenses, will be doing so at depressed prices. “Total return”, for a retiree, is the dumbest, most brain-dead metric one could possibly use… unless they enjoy selling off stocks after they have dropped substantially.

"Reason and facts are sacrificed to opinion and myth. Demonstrable falsehoods are circulated and recycled as fact. Narrow minded opinion refuses to be subjected to thought and analysis. Too many now subject events to a prefabricated set of interpretations, usually provided by a biased media source. The myth is more comfortable than the often difficult search for truth."

It is always nice to read the myths of Norman Bernstein.

From Norman's reference.

From 1991through 2015, non-dividend paying stocks earnedjust +4.18% return per year while dividend payingstocks significantly outperformed with a +9.7%average annual return.

My S&P500 total return calculator shows that the S&P500 total return for both dividend and non dividend stocks from 1991 thru 2015 was 9.876%. I guess a comment about the sum of the parts being worth more than parts is in line. But I would suggest poor math skills on the part of Morgan Stanley.

But one myth Norman spreads is that individual stocks perform as well as the group they are part of. The stocks Norman listed may be dividend kings, but they deviate from the performance of the dividend king ETF. The same can be said about the individual components of the dividend aristocrats ETF. It is noteworthy that there are several current lists of kings and aristocrats, each list is different despite having the same inclusion criteria. It is also noteworthy that the allocation of each member and thus the performance differs from list to list - from the various mutual funds or ETFs in thee same class.

I don't dispute that as a group the dividend aristocrats or kings have outperformed the S&P500 for some time periods. Even the NASDAQ has. Many other mutual funds and ETFs also outperform. The problem is that the stocks Norman suggests now and in the past have always underperformed the S&P500. These stocks by massive amounts. But by his own comments his stocks have underperformed the S&P500 by 1% annually. That is a large amount over time.

Another myth Norman spreads is that the very short term drops in the S&P500 is important for retired individuals. As I said above: The S&P500 outperformed expectations by 30% over the past 41 months. Hard to make a claim of down-turn when you are doing much better than you ever expected.

[Too Little Time]

^^^^^ How does anyone manage to travel with him on a long trip when his self-satisfaction takes up all of the trunk space?

I get to drive. Everyone else gets to sleep.

[Nicholas Scheuer]

I guess the bank stock my grandfather bought about 1900 is one of those divided kings. My 10 shares (my brothers also have 10) earns about $3500/yr.

[Boatbum]

Here's a minor observation, for the very few people who might be interested.

Dividend Kings are corporations who have paid dividends for at least 50 years without interruption; they are companies with strong brands and profitable businesses, sufficient to devote a percentage of profits as a direct return to shareholders. These are not 'growth' companies, in the sense that investors would expect them to increase their share prices commensurate with the S&P 500... although it is also not true that they don't grow. The sum of their growth and dividends, by some analyses, has vastly outstripped the overall performance of the market for long periods of time.

Just for laughs, I took a look at the list of dividend kings, sorted by the size of their dividends. About 3/4 of the top 17 on the list are VERY recognizable names (IBM, Clorox, 3M, etc.) The average yield of the top 17 on the list, all of whom pay dividends of at least 3%, is actually 3.85%.

In light of the current market downturn, those lucky enough to have preserved some cash might find the list interesting. Just google 'dividend kings list'.

And interestingly even in a bear market, stocks that have dividend yields, do not significantly reduce the amount of the dividend - the gift that keeps on giving.

[WI-Tom]

And interestingly even in a bear market, stocks that have dividend yields, do not significantly reduce the amount of the dividend - the gift that keeps on giving.

Yep. So if I've understood Norman correctly, it doesn't really matter if the dividend kings underperform the S&P, if you are relying on the dividends for income. You don't really care if the stock price drops temporarily, because the dividend that pays your bills typically doesn't drop at all.

Y'all have me thinking about how I might add some dividend stocks into my planning--not sure it makes sense for me at my age, but worth looking into. Thanks!

Tom

[George.]

Remember when GE was the Dividend King of Kings?

Until they stopped paying any in March 2009.

[Too Little Time]

And interestingly even in a bear market, stocks that have dividend yields, do not significantly reduce the amount of the dividend - the gift that keeps on giving.

So, you are also one of the people who think that a 66% increase in the S&P500 over 41 months is a sign of doom and gloom.

As I pointed out none of the 3 stocks Norman mentioned participated in the increase. And that is being generous to their stock prices. Dividends must have a special meaning to you for you to be willing to lose so much price appreciation.

[David W Pratt]

Your heirs may be interested in their growth.

[Too Little Time]

Yep. So if I've understood Norman correctly, it doesn't really matter if the dividend kings underperform the S&P, if you are relying on the dividends for income. You don't really care if the stock price drops temporarily, because the dividend that pays your bills typically doesn't drop at all.

That appears to be his claim.

Of course, the stock prices of 2 of the 3 he listed have fallen 20% (over the past 41 months). And the S&P500 has risen 66%. One is asked to believe the 66% gain is a downturn and the 20% fall is temporary. Losing 50% to the S&P500 is not viewed as a positive sign.

[Norman Bernstein]

… that damned ankle biter keeps nipping at my heels

[Norman Bernstein]

I plan to write a separate thread that might explain things more clearly, tomorrow.

[Too Little Time]

I plan to write a separate thread that might explain things more clearly, tomorrow.

That might be helpful.