sure dividend · quality dividend growth stocks remain an excellent place to invest for long ......
TRANSCRIPT
Sure Dividend HIGH QUALITY DIVIDEND STOCKS, LONG-TERM PLAN
August 2014 Edition
By Ben Reynolds
Table of Contents
Thoughts ........................................................................................................................................ 3
The Top 10 List ............................................................................................................................. 4
Stocks to Sell .................................................................................................................................. 5
Stocks to Hold ................................................................................................................................ 5
Review of April’s Top 10 Stocks .................................................................................................. 6
WalMart (WMT) ......................................................................................................................... 6
PepsiCo (PEP) ............................................................................................................................. 7
Coca-Cola (KO) .......................................................................................................................... 8
McDonald’s (MCD) .................................................................................................................... 9
General Mills (GIS) .................................................................................................................. 10
Abbott Laboratories (ABT) ....................................................................................................... 11
Becton Dickinson (BDX) .......................................................................................................... 12
ExxonMobil (XOM) ................................................................................................................. 13
Philip Morris International (PM) .............................................................................................. 14
J.M. Smucker’s (SJM) .............................................................................................................. 15
List of All Stocks ......................................................................................................................... 16
Performance ................................................................................................................................ 17
Portfolio Building Guide ............................................................................................................ 18
Examples ................................................................................................................................... 18
Ending Thoughts ......................................................................................................................... 19
Page 3
Thoughts
July marks the first down month for the S&P 500 in 5 months. Last week
(week of July 28th) was the worst week for the stock market since April.
The market was down over 2% on the month. Reasons for increased fear
in the markets are:
Argentinean bond default
Weakness in EU economy
Rising US unemployment rate
Potential for interest rates to rise
Potential blowback from Russian sanctions
High debt to GDP across the developed world
China’s announcement that it was investigating tainted meat from fast food
meat provider Shanghai Husi created declines in the share prices of
McDonald’s, Yum! Foods, Burger King, and Pizza Hut.
Despite the negative news, the market may reverse and see strong gains
next month, or it may trend lower. Many of the high quality dividend
stocks discussed in this newsletter did not fare well this month. Equity
values are somewhat elevated, and a correction may come soon.
Regardless of the overall gloominess of this month’s market zeitgeist, high
quality dividend growth stocks remain an excellent place to invest for long
term real returns. Declining share prices in top names such as
McDonald’s, Wal-Mart, and ExxonMobil will create better entry points for
new investors.
For current investors, holding high quality businesses through turbulent
markets can be difficult. Markets fluctuate, but the underlying business
value of these companies generally rises in recessionary periods. Each of
the Top 10 businesses performance over the Great Recession of 2007 to
2009 is analyzed in this newsletter to show that fantastic businesses tend to
grow (or at least remain profitable) during recessions.
Page 4
The Top 10 List The stocks below have the best ranking based on the 8 Rules of Dividend
Investing. They are ranked in order from 1 to 10 below.
Ticker Name Yield Payout Growth Volatility
WMT Wal-Mart Stores Inc. 2.61% 37.27% 8.21% 19.14%
PEP PepsiCo Inc. 3.04% 56.97% 10.64% 17.39%
KO Coca-Cola 3.10% 58.00% 9.04% 18.71%
MCD McDonald’s 3.44% 56.38% 7.09% 20.14%
GIS General Mills 3.22% 57.95% 6.76% 17.02%
ABT Abbott Laboratories 2.10% 40.06% 8.50% 19.84%
BDX Becton Dickinson 1.88% 34.88% 8.03% 20.23%
XOM ExxonMobil 2.79% 34.68% 6.28% 25.33%
PM Philip Morris 4.60% 73.81% 8.63% 24.05%
SJM J.M. Smucker’s 2.31% 38.31% 6.30% 21.26%
Wal-Mart tops the rankings for the 5th
consecutive month. The company is an
excellent bargain in a largely overvalued market. PepsiCo, Coca-Cola, and
McDonald’s follow Wal-Mart rounding out the top 4.
BDX and J.M. Smucker’s replaced Kimberly-Clark and Chubb this month. The
Top 10 stocks have been relatively stable over the last several months. Changes
occur only when companies release new financial data, or when stock prices
change and reduce dividend yields.
An equally weighted portfolio of these 10 businesses has the following
characteristics:
Top 10 S&P500
Dividend Yield: 2.91% 1.95%
Payout Ratio: 48.83% 31.44%
Growth Rate: 7.95% 7.43%
Volatility: 14.19% 20.34%
PE Ratio: 16.93 16.15 (1 Yr. Forward P/E used)
- P/E is calculated as the current price divided by 2014 EPS as calculated by Value Line; lower is better - Dividend Yield is calculated as the current price divided by the most recent quarterly dividend x 4; higher is better - Payout ratio is the most recent quarterly dividend x 4 divided by 2014 EPS as calculated by Value Line; lower is better - Growth Rate is the lower of 10 year revenue per share or dividend per share compound growth; higher is better - Volatility is the 10 year standard deviation of dividend and split adjusted price series; lower is better
Page 5
Stocks to Sell
The stocks below used to be on the top 10 list, and should now be sold.
NONE
Stocks to Hold
The stocks below used to be on the top 10 list. They have since fallen off
the top 10 but should be held, not sold.
Clorox (CLX) – Added April 2014, replaced by GPC
Target (TGT) – Added April 2014, replaced by MMM
Genuine Parts Co. (GPC) – Added May 2014, replaced by PM
3M (MMM) – Added May 2014, replaced by T
AFLAC (AFL) – Added April 2014, replaced by BDX
AT&T (T) – Added June 2014, replaced by ABT
Becton, Dickinson (BDX) – Added June 2014, replaced by KMB
Chubb (CB) – Added April 2014, replaced by BDX
Kimberly-Clark (KMB) – Added July 2014, replaced by SJM
Page 6
Review of April’s Top 10 Stocks
Wal-Mart (WMT)
Overview Wal-Mart serves over 245 million customers each week from 11,000+ locations in
27 countries. It is by far the largest retailer in the world, with a market
capitalization of $241 billion, and annual sales of over $470 billion per year.
Competitive Advantage
Wal-Mart’s competitive advantage comes from its massive scale and operating
efficiency. The company pressures suppliers to lower prices, and passes the
savings on to consumers which results in an even greater size advantage for Wal-
Mart.
Recession Performance The Great Recession of 2007 to 2009 did not affect Wal-Mart’s operations. The
company grew revenue, earnings, and dividends each year through the recession.
The company’s low prices are more appealing to consumers during times of
economic hardship, insulating the company from recessions.
Current Events Wal-Mart’s most recent quarterly results saw constant currency revenue grow
2.1%. Wal-Mart US increased revenue 2%, and Sam’s Club grew revenues only
0.1%. Wal-Mart International grew constant currency revenue 3.4%.
Growth Prospects
The company’s future growth rests in growing US same store sales through better
inventory management and product mix, increasing developed and developing
market penetration, and investing in e-commerce solutions. The company’s e-
commerce sales increased a remarkable 27% quarter-over-quarter; Wal-Mart is
also exploring the possibility of same day delivery by leveraging its extensive
distribution network.
Dividend Stats Dividend Yield: 2.57%
10 Year Dividend Growth Rate: 18.00%
Most Recent Dividend Increase: 2.13%
Dividend History: 41 Consecutive years of dividend increases
Page 7
PepsiCo (PEP)
Overview PepsiCo manufacturers and sells snacks and food items under its Frito-Lay and
Quaker brands, and carbonated and non-carbonated drinks under its various drink
brands which include Pepsi, Mountain Dew, Gatorade, 7 Up, and Tropicana. The
company has 22 brands that do over $1 billion in annual sales.
Competitive Advantage PepsiCo’s competitive advantage lies in its highly recognizable brands. It
reinforces brand awareness through high advertising spending to better promote its
products.
Recession Performance PepsiCo’s operating performance was stellar over the 2007 to 2009 Great
Recession. The company ‘s revenue dipped very slightly from 2008 to 2009, and
earnings had a small dip from 2007 to 2008. Recessions slow the company’s
growth, but do little to impact profitability.
Current Events PepsiCo’s growth continued in its most recent quarter. The company posted 3.6%
constant currency revenue growth, and constant currency EPS growth of 9%. Its
constant currency revenue growth by division is listed below:
PepsiCo Americas Foods 4%
PepsiCo Americas Beverages 1%
Europe 5%
Asia, Middle East, & Africa 7%
Growth Prospects PepsiCo’s flagship Pepsi brand and other carbonated beverages are experiencing
stagnant growth as consumers change their beverage preferences to non-carbonated
drinks. The company’s growth potential lies with its Frito-Lay and non-carbonated
beverage brands coupled with increased growth and market penetration in the
developing world.
Dividend Stats Dividend Yield: 2.95%
10 Year Dividend Growth Rate: 13.50%
Most Recent Dividend Increase: 15.32%
Dividend History: 42 Consecutive years of dividend increases
Page 8
Coca-Cola (KO)
Overview Coca-Cola is the world’s leading carbonated beverage company based on sales.
Coca-Cola has 17 brands that sell over $1 billion annually. The company boasts a
strong non-carbonated brand portfolio including: Simply, Minute Made, Vitamin
Water, Dasani, and Powerade.
Competitive Advantage Coca-Cola’s competitive advantage comes from its highly recognizable brands.
The company’s brands are developed through large advertising campaigns
globally.
Recession Performance Coca-Cola was minimally effected by the Great Recession of 2007 to 2009. The
company’s earnings per share dipped slightly in 2009, but the company’s overall
performance was not severely impacted.
Current Events Coca-Cola increased constant currency revenue 3% for its most recent quarter.
The company grew volume by geography as follows:
Asia Pacific 8%
Euraisa & Africa 5%
North America 0%
Europe 0%
Latin America 0%
Growth Prospects The company’s future growth will come increasingly from the developing world.
For the most recent quarter, volume was flat in developed economies, while the
developing world accounted for the company’s growth. Coca-Cola’s strong
carbonated and still brands have a long growth runway for the company. Coca-
Cola’s non-carbonated portfolio is well positioned to take advantage of slowing
carbonated sale; Coca-Cola has captured 33% of global juice growth since 2007.
Dividend Stats Dividend Yield: 3.08%
10 Year Dividend Growth Rate: 10.00%
Most Recent Dividend Increase: 8.93%
Dividend History: 52 consecutive years of dividend increases
Page 9
McDonald’s (MCD)
Overview McDonald’s is by far the largest publicly traded restaurant in the world. It has a
market cap of about $95 billion and annual sales of $28 billion. The company
serves a variety of low-cost burgers and sides through its 34,000+ locations around
the world.
Competitive Advantage McDonald’s derives its competitive advantage from its strong brand and
franchising business model. The company’s golden arches are easily recognized
throughout the world. McDonald’s franchising model allows it to grow quickly
and realize higher return on assets than a store-owned business model.
Recession Performance The Great Recession of 2007 to 2009 did not impact McDonald’s. The company
grew revenue per share, earnings per share, and dividends per share each year
throughout the recession. The company’s low priced food items tend to do well in
recessions as consumers switch from more expensive restaurants to cheaper
options.
Current Events McDonald’s has had several rounds of negative publicity lately. Russia and China
are both imposing their versions of economic sanctions on the US by targeting
McDonald’s (and other US fast food chains). McDonald’s most recent quarterly
report was also disappointing, with constant currency sales up only 1%, and
decreasing same store sales in the US.
Growth Prospects McDonald’s long-term growth prospects are much more favorable than the
negative current events the company has experienced. McDonald’s can improve
US same store sales through new product innovation and a cleaner menu layout.
The company has a very strong international presence, with about 70% of sales
coming overseas. McDonald’s strong international brand recognition gives it a
long growth runway ahead in developing markets.
Dividend Stats Dividend Yield: 3.38%
10 Year Dividend Growth Rate: 25.50%
Most Recent Dividend Increase: 5.19%
Dividend History: 37 consecutive years of dividend increases
Page 10
General Mills (GIS)
Overview General Mills sells branded food products in over 100 countries around the world.
The company’s brands include: Cheerios, Yoplait, Pilsbury, Betty Crocker, Valley
Fresh, Nature Valley, and Progresso.
Competitive Advantage General Mills is able to sell its grocery products at premium prices thanks to their
strong brand names. The company’s brands are ubiquitous in grocery stores and
easily recognizable by consumers.
Recession Performance General Mills sells staple food products. Food is one of the few items people can’t
cut back on during recessions. General Mills increased revenue, earnings, and
dividends each year from 2007 through 2009 during the Great Recession. The
company is highly insulated from the effects of economic downturns.
Current Events Constant currency revenues increased only 1% for General Mills over the last year.
The company increased constant currency earnings per share 4% in the same time
period. The company expects high single digit earnings per share growth over the
next several years from mid single digit revenue growth and share repurchases.
Growth Prospects General Mills currently generates the bulk of its revenue from US retail sales. The
company plans to return its US sales to growth by:
1. Renovating its flagship cereal brands and yogurt brands
2. Capitalizing on increasing Hispanic brand sales
3. Focusing on better-for-you snacking through its LARA, Nature Valley, and
Fiber One brands
The company has further growth potential in international markets. General Mills
has grown international sales at a 16% CAGR since 2009, and currently generates
35% of sales internationally.
Dividend Stats Dividend Yield: 3.18%
10 Year Dividend Growth Rate: 9.50%
Most Recent Dividend Increase: 7.89%
Dividend History: 114 consecutive years without a reduction
Page 11
Abbott Laboratories (ABT)
Overview Abbott Laboratories designs and produces nutritional products, medical devices,
pharmaceuticals, and diagnostic equipment in the health care industry. Abbott
Laboratories is geographically diversified, with 40% of sales coming from
emerging markets, 30% from the US, and 30% from other developed economies.
Competitive Advantage Abbott Laboratories competitive advantage comes from its ability to develop new
medical products, devices, and pharmaceuticals and have its products approved
and marketed throughout the world. The company’s product and global
diversification allows it to allocate more capital where returns are highest.
Recession Performance The company managed to grow revenue, earnings, and dividends each year
through the Great Recession of 2007 to 2009. Health is one of the few areas that
consumers and governments do not cut back on, even in times of economic trouble.
Current Events Abbott Laboratories posted lackluster revenue growth of 0.5% for the first quarter
of 2014. The company’s growth is likely to pick up through the rest of the year, as
management expects revenue growth in the mid single digits through 2014.
Growth Prospects Abbott Laboratories’ strong emerging market penetration gives it excellent long-
term growth prospects. As emerging markets grow, their GDP spend on health
care will increase. Additionally, populations are aging around the world. The
combination of emerging market economic growth and aging populations make an
excellent macroeconomic environment to promote Abbott Laboratories’ growth.
Dividend Stats Dividend Yield: 2.09%
10 Year Dividend Growth Rate: 8.50%
Most Recent Dividend Increase: 57.14%
Dividend History: 42 consecutive years of dividend increases
Page 12
Becton Dickinson (BDX)
Overview BDX is a global producer of medical, diagnostic, and bioscience products. BDX
was founded in 1897; the company’s proprietary medical technology makes the
company a leading provider of medical products.
Competitive Advantage The company’s competitive advantage comes from its existing contacts and
distribution network in the global health care industry, coupled with its excellent
new product pipeline. BDX currently generates about 60% of its revenues
internationally, and is growing revenue fastest in developing markets.
Recession Performance BDX operates in the health care industry which has traditionally done well through
recessions. BDX grew revenue, earnings, and dividends from 2007 through 2009
during the Great Recession of the same time. The company is minimally affected
by economic downturns.
Current Events BDX grew constant currency revenue 4.6% for its most recent quarter. The
company’s US revenue grew 2.8%, while international revenue increased 6% on a
constant currency basis. The company has grown emerging market revenue 12%
year to date. Emerging market revenue now accounts for nearly 25% of BDX’s
revenue.
Growth Prospects BDX has excellent future growth prospects. The company has a long history of
innovating new products to grow revenue. It is also adept at international
expansion. The company has a long growth runway ahead due to an aging global
population and significant exposure to quickly growing emerging markets.
Dividend Stats Dividend Yield: 1.88%
10 Year Dividend Growth Rate: 16.50%
Most Recent Dividend Increase: 10.10%
Dividend History: 42 consecutive years of dividend increases
Page 13
ExxonMobil (XOM)
Overview Exxon Mobil is the world’s largest publicly traded oil company, and 2
nd largest
publicly traded corporation overall with a market cap of $425 billion. The
majority of Exxon’s profits come from its lucrative upstream business. The
company also has smaller downstream and chemical business units.
Competitive Advantage Exxon’s competitive advantage comes from its size, history, and technical
knowledge in its highly profitable upstream business. The company is efficient at
finding and producing oil and natural gas. Exxon’s size and history with the US
government and other oil companies give it access to lucrative oil & gas
investment opportunities.
Recession Performance Exxon’s earnings took a significant dip from $11.58/share to $6.60/share in 2008.
The company’s profit margins are somewhat sensitive to recessions, as oil prices
tend to decline during times of economic hardship. The company’s long-term
outlook is not impacted by short term (or even multiyear) recessions.
Current Events Exxon’s earnings per share increased 32% up to $2.05 in the most recent quarter
versus the same quarter a year ago. Earnings increased in each of the company’s
business units. Exxon is well positioned for the future with a globally diversified
portfolio of oil and gas assets.
Growth Prospects Exxon’s future growth will come from increasing demands for energy brought on
by global GDP per capita growth. The world depends on energy provided by
Exxon (and other oil companies) to run. Exxon’s long-term growth prospects are
favorable and in line with the company’s current expectations.
Dividend Stats Dividend Yield: 2.79%
10 Year Dividend Growth Rate: 8.50%
Most Recent Dividend Increase: 9.52%
Dividend History: 32 consecutive years of dividend increases
Page 14
Philip Morris International (PM)
Overview Philip Morris is the world’s largest cigarette company, with a market cap of $129
billion. The company sells Marlboro, Parliament, Virginia Slims, and other
cigarette brands internationally (not in the US).
Competitive Advantage Philip Morris competitive advantage comes from its strong brands. Marlboro is
one of the most valuable global cigarette brands. In addition, Philip Morris sells a
highly addictive product and can increase prices to offset additional taxes levied by
governments around the world.
Recession Performance Philip Morris was spun off from Parent company Altria during the most recent
recession. Tobacco businesses have traditionally performed well through
recessions, as consumers tend to smoke the same (or more) amount of cigarettes
during times of economic hardship.
Current Events Philip Morris grew currency adjusted revenue 4.5% for its most recent quarter. In
addition to revenue growth, Philip Morris has repurchased about 8% (!) of its
shares outstanding over the last 12 months. Philip Morris achieved solid growth in
the most recent quarter by gaining market share over its competitors and raising
prices. The company has proven it can grow revenue despite declines in overall
cigarette volume.
Growth Prospects Philip Morris shareholders will receive strong returns from the company’s high
dividend yield, strong share repurchases, and organic growth. The company’s
long-term growth will come from the e-vapor industry, which is still in its infancy.
Philip Morris has partnered with Altria to create new products and license each
other’s current offerings in the e-Vapor industry.
Dividend Stats Dividend Yield: 4.58%
10 Year Dividend Growth Rate: N/A, 26.50% for past 5 years
Most Recent Dividend Increase: 10.59%
Dividend History: 30 consecutive years of dividend increases
(Counting Altria history before spin-off)
Page 15
J.M. Smucker’s (SJM)
Overview Smucker's is a consumer branded food and coffee business. The company's
flagship brands include Folger's coffee, Smucker's jellies, and Jif peanut butter.
The company was founded in 1897.
Competitive Advantage Smucker’s competitive advantage stems from its strong consumer brands and
dominant market positions. The company holds the number 1 position in US retail
coffee (Folger’s), peanut butter (Jif), fruit spreads (Smucker’s), natural beverages
(R.W. Knudsen), shortening (Crisco), and sweetened condensed milk (Eagle
Brand).
Recession Performance Smucker’s earnings per share grew each year of the Great Recession from 2007
through 2009. The company’s strong performance comes from its branded
consumer staple products. Smucker’s is minimally impacted by recessions as
consumers typically do not cut back on inexpensive store bought food items during
recessions.
Current Events Smucker’s 2014 results were mixed. The company posted 8% EPS growth versus
the prior year due to increasing margins and strong share repurchases. Revenue
decreased 5% for the year, due to lower prices on coffee and weak international
performance including the discontinuance of hot beverage sales and Smucker’s
Uncrustables in international food services.
Growth Prospects
Smucker’s expects strong 5% organic revenue growth in its fiscal 2015 and
long-term EPS growth of around 8%. The company plans to grow through
product innovation with its strong brand names and through acquisitions.
Smucker’s is focused primarily in the US market where it has a stronger
brand image.
Dividend Stats Dividend Yield: 2.31%
10 Year Dividend Growth Rate: 10.00%
Most Recent Dividend Increase: 11.54%
Dividend History: SJM has not reduced its dividend since 1949
Page 16
List of All Stocks
The following 132 businesses all have 25+ years of dividend payments
without a reduction. The list is ranked in order based on the 8 Rules of
Dividend Investing, with the highest ranked stocks first. Canadian stocks
are denoted in Red.
1. WMT 2. PEP 3. KO 4. MCD 5. GIS 6. ABT 7. BDX 8. XOM 9. PM 10. SJM 11. ECL 12. KMB 13. HRL 14. GWW 15. CB 16. MDT 17. BCR 18. MO 19. MKC 20. TGT 21. JNJ 22. SIAL 23. PG 24. T 25. SHW 26. CTAS 27. MMM
28. VFC 29. CL 30. VAL 31. GPC 32. PNR 33. AFL 34. CLX 35. HSY 36. KRFT 37. UTX 38. ENB 39. MDLZ 40. BCE 41. CVX 42. BMS 43. ABBV 44. ADM 45. WAG 46. LOW 47. ADP 48. FTS.TO 49. CBSH 50. ITW 51. ED 52. IMO 53. SYY 54. DOV
55. FFIN 56. TMP 57. TROW 58. UGI 59. SON 60. PH 61. FDO 62. MHFI 63. UVV 64. NDSN 65. SWK 66. HP 67. AWR 68. VVC 69. EV 70. BF-B 71. BEN 72. MGEE 73. CU.TO 74. COP 75. ATO 76. AJG 77. CSVI 78. EMR 79. PPG 80. WGL 81. SRCE
82. BKH 83. RLI 84. CTBI 85. TR 86. DCI 87. LANC 88. FUL 89. CLC 90. CSL 91. STR 92. NWN 93. ABM 94. WEYS 95. RAVN 96. CAH 97. PNY 98. EMP-A 99. GRC 100. SCL 101. CTWS 102. EFSI 103. NTRS 104. MSEX 105. MCY 106. UHT 107. THFF 108. JCI
109. CINF 110. RPM 111. APD 112. ORI 113. EGN 114. BWL.A 115. HCP 116. LEG 117. HARL 118. OTTR 119. NFG 120. BRC 121. CWT 122. SJW 123. UBSI 124. NC 125. TNC 126. MSA 127. DBD 128. FRT 129. UNS 130. NUE 131. TDS 132. HNI
Page 17
Performance This section tracks the total return of each recommendation made by Sure
Dividend and compares the recommendation versus the total return of the stock
market (as measured by the ticker SPY) over the same time period.
Ticker Start Start Price
Dividends Price Now
Return Market Return
Difference
WMT 7-Apr $77.31 $0.480 $73.54 -4.26% 4.93% -9.19%
PEP 7-Apr $83.91 $0.655 $88.11 5.79% 4.93% 0.86%
KO 7-Apr $38.62 $0.305 $39.29 2.52% 4.93% -2.41%
MCD 7-Apr $97.01 $0.810 $94.30 -1.96% 4.93% -6.89%
CB 7-Apr $88.64 $0.500 $86.98 -1.31% 4.93% -6.24%
XOM 7-Apr $96.78 $0.690 $98.80 2.80% 4.93% -2.13%
KMB 7-Apr $110.11 $0.840 $104.90 -3.97% 4.93% -8.90%
AFL 7-Apr $61.72 $0.370 $59.12 -3.61% 4.93% -8.54%
CLX 7-Apr $88.79 $1.440 $89.20 2.08% 4.93% -2.85%
TGT 7-Apr $60.50 $0.430 $59.85 -0.36% 4.93% -5.29%
GPC 5-May $84.73 $0.575 $82.61 -1.82% 2.66% -4.48%
MMM 5-May $140.61 $0.855 $140.11 0.25% 2.66% -2.41%
GIS 2-June $54.91 $0.410 $50.93 -6.50% 0.27% -6.77%
T 2-June $35.44 $0.460 $35.33 0.99% 0.27% 0.72%
PM 2-June $88.32 $0.940 $81.90 -6.20% 0.27% -6.47%
BDX 2-June $118.05 $0.545 $116.08 -1.21% 0.27% -1.48%
ABT 7-July $41.51 $0.220 $42.03 1.78% -2.54% 4.32%
*Comparisons are virtually worthless over short timeframes (like the 4 months or less above). 3 years
and longer is a fair timeframe to judge performance.
Only PepsiCo, AT&T, and Abbott Laboratories have outperformed the market
since inclusion into the Sure Dividend portfolio. Fourteen of the other seventeen
selections have underperformed the market since inclusion.
High quality dividend stocks tend to slightly underperform the market in strong
bull markets, which we have seen from April through June. In July, the market
began to decline. Economic sanction backlash fears from Russia and China
combined with poor quarterly earnings pushed several of the companies on this list
downward. The long-term prospects of all businesses on the list remain positive.
Over a long-horizon, I believe the total return of the Sure Dividend strategy will
outpace the total return of the stock market, with significantly less volatility. This
performance page accurately tracks how true the above statement turns out to be.
Page 18
This information is not personalized advice. It is for informational purposes only. Please see disclaimer at end of newsletter for more.
Portfolio Building Guide
Invest in the top ranked stock you own the smallest dollar amount of each month. Over time,
you will build a well-diversified portfolio of great businesses purchased at attractive prices.
Examples
Portfolio 1 Portfolio 2
Ticker Name Amount Ticker Name Amount
WMT Wal-Mart Stores Inc. $ 1,002 WMT Wal-Mart Stores Inc. $ 4,374
PEP PepsiCo Inc. $ - PEP PepsiCo Inc. $ 4,878
KO Coca-Cola $ - KO Coca-Cola $ 4,353
MCD McDonald’s $ - MCD McDonald’s $ 2,952
GIS General Mills $ - GIS General Mills $ 3,309
ABT Abbott Laboratories $ - ABT Abbott Laboratories $ 4,864
BDX Becton Dickinson $ - BDX Becton Dickinson $ 6,660
XOM ExxonMobil $ - XOM ExxonMobil $ 2,367
PM Philip Morris $ - PM Philip Morris $ 2,818
SJM J.M. Smucker’s $ - SJM J.M. Smucker’s $ 6,243
If you had portfolio 1, you would buy PepsiCo, the top ranked stock you own least.
If you had portfolio 2, you would buy ExxonMobil, the top ranked stock you own least.
If you have an existing portfolio, switch over to the Sure Dividend strategy over a period of 20
months. Each month, take 1/20 of your initial portfolio value, and buy the top ranked stock you
own the least (as per the examples above).
When you sell a stock, use the proceeds to purchase the top ranked stock you own the least.
Reinvest dividends in the same manner.
This simple investing process will build a diversified portfolio of high quality dividend stocks
over a period of less than 2 years. Your savings will be invested only in highly ranked stocks by
buying in over a period of time. Further, higher ranked stocks will get proportionately more
investment dollars as they will stay on the rankings longer. You will build up large positions in
the highest quality stocks over your investing career.
Alternatively, the Top 10 list is also useful as an idea generation tool for those with a different
portfolio allocation plan.
Disclaimer Nothing presented herein is, or is intended to constitute, specific investment advice. Nothing in this newsletter should be construed as a
recommendation to follow any investment strategy or allocation. Any forward looking statements or forecasts are based on assumptions and
actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. While Sure Dividend has used reasonable efforts to obtain information from reliable sources, we make no
representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of
investment performance is being provided and no inference to the contrary should be made. There is a risk of loss from an investment in securities. Past performance is not a guarantee of future performance.
Ending Thoughts
Thanks for reading the August edition of Sure Dividend’s monthly
newsletter. As discussed above, high quality dividend growth stocks did
not perform particularly well this month due to international and domestic
fears. The long term record of dividend growth stocks is very positive,
although they do not outperform every month.
The Dividend Aristocrats index was down nearly 3% on the month, versus
2.3% for the overall market. High quality dividend stocks have typically
outperformed in bear markets, but that was not the case this month. If the
market continues downward it is likely that high quality dividend stocks
will suffer smaller losses than the overall market based on historical
results.
As always, investing is a marathon not a sprint. The performance of any
one month or quarter is insignificant compared to the impact of long-term
thinking and allocating your portfolio to excellent businesses trading at fair
or better prices.
You can reach me at [email protected] with any comments,
suggestions, feedback, or reviews.
Thanks,
Ben Reynolds