This just came my way via an email from Graham, a reader, this morning. He wrote of things I had never researched or studied for myself, as my emphasis has always been right on the safe-growing of a portfolio dividend income, as any reader would know. But, I could not help, but find it to be incredibly interesting, as well as most likely being logical, too; since I am always trying to find the very highest quality, safest-dividend growing stocks.
“Harold has stated the following recently in June:
“The concept of starting with high dividend safety issues, having the “best looking” EPS lines, is that the smoother EPS lines assure continually high dividend safety. It also means that those companies are least affected by outside economic forces, such as occurred during the GFC. I say that these companies get to effectively “write their own check!”
So, I decided to test the statement by setting up a Harold Watchlist made up of stocks he has mentioned in various postings and study what happened during three discrete periods as follows:
A) The period from a pre GFC (Global Financial Crisis) high to GFC low, then B) The subsequent time to it took for these securities to recover from the GFC low price back to the pre GFC high price, and C) The Gain/Loss performance from the GFC low on 3/2/2009 to 6/26/2015 when I conducted this analysis. I then compared how the Harold Watchlist fared against the S&P 500 Index, the DJI Index, and a Buffett Top 20 Dividend Stocks.
The Harold Watchlist contained the following stocks: ABC,AFSI,AOS,BLK,CHD,CMCSA,CNI,COST,CNI,COST,CVS,ECL,FDS,HRL,IBM,JKHY,QCOM,ROST,TJX,TSCO,UNP,VFC (22 positions). Note: I did not include any stocks mentioned in posts by Harold that were not paying dividends at the time of the GFC, i.e. GILD, AAPL etc.
The Buffett Watchlist was obtained by searching the internet for Buffett top 20 dividend paying stocks. The stocks in this Watchlist were: DE,GE,GM,IBM,JNJ,KO,KRFT,MDLZ,MTB,NOV,PG,PSX,SNY,SU,UPS,USB,VIAB,VZ,WFC,WMT.
(Note: No effort was made to include dividend reinvestments, either during the GFC drop period, or the subsequent recovery. Suffice it to say the results would be better than indicated in the table.)
GFC Price Drop Recovery Time to pre GFC High % G/L 3/2/09-6/26/15
The Harold Watchlist 42% 2 years, 2months 410%
S&P 500 Index 50% 5 years, 6 months 278%
DJ Industrials 50% 4 years, 6 months 287%
Buffett Top 20 51% 4 years, 5 months 236%
I believe this comparison chart supports and substantiates Harold’s statement that “high quality companies are less affected by external economic forces”. What the chart also reveals is the astounding ability of these companies to recover so much faster and show future returns much higher than the indexes over a sustained period of time.
In summary I must say I’m impressed with Harold’s approach. Sure beats the indexes.”
And, Graham, I’m sure glad you went to all the trouble to conduct that research. It had never occurred to me to do so, and I hadn’t given that hardly any thought. My emphasis upon the very safest-dividend growth has brought me to the very highest quality companies on the planet, and so, it tends to reason that these companies might also outperform on an appreciation and a total return basis… all the while providing for us the very safest-dividend growth that is both reasonably and sustainably taking place in the teens!
Thanks for your effort and support! May God bless you.
Here’s to your successful investing!
Harold F Crowell