This post was updated on October 4th, 2011
Each year Mike at The Dividend Guy, hosts a dividend stock-picking contest among the financial bloggers. Last year he hosted The Best Stock Picks Contest for 2011, and one of his readers pummelled all the bloggers with his 94% gain!
This year it’s a little different. Rather than a stock-picking contest, Mike has gathered an exceptional group of
seven eight dividend investors and financial bloggers to create a dividend project. By coincidence that includes me! Each of us has picked our favourite three dividend stocks, creating a portfolio (or index) of twenty-one 24 dividend stocks. The Project is called the Dividend Growth Index (DGI), and includes both Canadian and U.S. stocks.
Mike will follow the entire index on his site, but each of us will provide quarterly updates on our stock picks, analyzing performance, dividend payouts, and other important news related to our companies. Each of us will update our results quarterly starting on December 31st.
Update to the Index
On Monday October 3rd, Dividend Growth Investor was officially added to the Dividend Growth Index, and his three picks are Chevron (CVX-N), McDonald’s (MCD-N), and Enterprise Product Partners (EPD-N). This now brings the Dividend Growth Index up to 24 companies, with 8 investors choosing three stocks each.
The rules are pretty simple! There are
seven eight bloggers picking three stocks each, for a total of 21 24 stocks to create the Dividend Growth Index (DGI). To be selected for the DGI a stock must pay a dividend. The Index then uses an equal weighting for each stock, and the starting price was initiated on the close of Friday September 23rd, 2011. All dividends will be reinvested into a cash account, instead of DRIPs (Dividend Reinvestment Plans). Once a year, each blogger will make the decision to reinvest those dividends into one of their 3 stocks. A stock may be dropped from the index, and a new stock added. However the emphasis is on a long-term buy and hold strategy, to foster the accumulation of dividends.
Although it hasn’t been confirmed, we will be benchmarking the Dividend Growth Index to a combination of the TSX Composite Index and the S&P 500 Composite Index. That would be about 60% to the S&P 500, and 40% to the TSX. More information to follow on this!
PS – This is a secret dividend project, so no indexing investors allowed! We are going to beat the index anyway, since we all know a carefully chosen portfolio of dividend stocks (even risky ones) will beat the index every time. (Don’t tell Andrew Hallam or the Canadian Couch Potato I said that – OK).
The Dividend Growth Investors
Seven Eight financial bloggers, who also invest in dividend stocks, will contribute to the DGI. You’ll recognize these names, and if you don’t your missing out on some great reading. For example, Dividend Monk writes some of the best stock analyses around. My Own Advisor is one of my favourite bloggers – combining both index and dividend investing strategies. Dividend Mantra is on his journey to accumulate wealth with a Buffett inspired strategy, and he wouldn’t buy a bond if I paid him. The Wealthy Canadian is the new blogger on the scene, but he’s a millionaire whose been investing in dividend stocks for years. And the Passive Income Earner is also on his way to dividend wealth.
- Dividend Growth Investor
- Dividend Guy
- Dividend Mantra
- Dividend Monk
- Dividend Ninja – That’s me!
- My Own Advisor
- Passive Income Earner
- The Wealthy Canadian
The Dividend Growth Index
21 24 stocks that make up the Dividend Growth Index, selected from some of the large sectors on the U.S. and Canadian exchanges. We have some very astute and established dividend investors and financial bloggers contributing to the index, and for the most part everyone has made some great selections. Certainly there are some riskier stocks here that I would not add to my portfolio, and I’ll discuss that in another post. But each blogger will explain their picks in more detail next week. There is no competition here; everyone is contributing to the performance of an overall index (but I’d still like to win). As I used to tell my grandmother when I was kid playing cards with her, “…winning isn’t everything, but losing isn’t anything!”
There is about a 60% allocation to U.S. stocks which trade on the NYSE and Nasdaq, and a 40% allocation to stocks which trade on the Canadian TSX (see table below). Since the Dividend Growth Index companies are personal stock picks, the index is not weighted by sector (see table below). For example, the DGI is over-weighted towards Consumer Products, and Oil and Gas companies, which comprise 53% of the index. Anytime you move away from an equal-weighting in a portfolio there are risks. Here are the
seven eight bloggers and our three picks:
Table 1. The Dividend Growth Index
|Abbott Labs||ABT-N||3.80%||Consumer Products||My Own Advisor|
|Aflac||AFL-N||3.80%||Financial Services||Passive Income|
|Bank of Nova Scotia||BNS-T||4.20%||Financial Services||My Own Advisor|
|Canadian Nat. Railway||CNR-T||2.00%||Transportation and Environmental||Passive Income|
|Canadian Nat. Resources||CNQ-T||1.20%||Oil and Gas||Passive Income|
|Chevron Corp.||CVX-N||3.40%||Oil and Gas||Dividend Growth Investor|
|CML Healthcare||CLC-T||8.40%||Other Services||My Own Advisor|
|Coca-Cola||KO-N||2.80%||Consumer Products||Dividend Guy|
|Conoco Phillips||COP-N||4.20%||Oil and Gas||Dividend Mantra|
|Daylight Energy||DAY-T||10.60%||Oil and Gas||Wealthy Canadian|
|Energy Transfer Equity||ETE-N||6.30%||Oil and Gas||Dividend Monk|
|Enterprise Product Partners||EPD-N||3.40%||Oil and Gas||Dividend Growth Investor|
|Husky Energy||HSE-T||5.50%||Oil and Gas||Dividend Ninja|
|Intel||INTC-Q||3.80%||Industrial Products||Dividend Guy|
|McDonald’s Corp.||MCD-N||3.20%||Merchandising & Lodging||Dividend Growth Investor|
|National Bank||NA-T||4.20%||Financial Services||Dividend Guy|
|Novartis AG||NVS-N||4.00%||Consumer Products||Dividend Monk|
|PepsiCo||PEP-N||3.40%||Consumer Products||Dividend Ninja|
|Phillip Morris||PM-N||4.80%||Consumer Products||Dividend Mantra|
|Procter & Gamble||PG-N||3.40%||Consumer Products||Dividend Mantra|
|Progressive Waste||BIN-T||2.60%||Transportation and Environmental||Wealthy Canadian|
|Royal Bank||RY-T||4.80%||Financial Services||Wealthy Canadian|
|Staples||SPLS-Q||3.00%||Merchandising & Lodging||Dividend Ninja|
|Wal-Mart||WMT-N||2.90%||Merchandising & Lodging||Dividend Monk|
|Average Dividend Yield||4.15%|
Table 2. DGI Allocation by Stock Exchange
|TSX – Toronto Stock Exchange||9||38%|
|NYSE – New York Stock Exchange||13||54%|
|Q – Nasdaq||2||8%|
Table 3. DGI Allocation by Sector
|Oil and Gas||7||29%|
|Merchandising & Lodging||3||13%|
|Transportation and Environmental||2||8%|
Next week I’ll run a detailed post on my three stock picks and why I chose them. I currently hold Staples in my portfolio, and I would not hesitate to buy a position in either Husky or PepsiCo:
- Husky Energy – HSE-T
- PepsiCo Inc. – PEP-N
- Staples Inc. – SPLS-Q
Readers, if you were playing what three stocks would you pick? What do you think of the Dividend Growth Index? Have a great week everyone!
For more detailed information see the Dividend Growth Index at the Dividend Guy Blog.