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High-Dividend Blue Chip Stock Portfolio Overview

Current Holdings
 

Our High-Dividend Blue Chip Stock Portfolio vs S&P 500 Since Inception (2003)

(Additional Performance Data)

This alternative stock portfolio is designed for those seeking income and growth from blue chip stocks. To be considered a blue chip stock, a company must be financially sound while demonstrating an ability to pay dividends in both good and bad times.

Specifically, to be considered for inclusion into this portfolio, a company must meet at least 5 of the 6 following qualifications:

  • A minimum of 25 years of uninterrupted dividends
  • Dividend increases 5 times or more in the last 12 years
  • Earnings growth in at least 7 of the last 12 years
  • S&P Quality ranking of A- or higher
  • A minimum of 80 institutional investors
  • A minimum of 5 million shares outstanding

Additionally, the company must have a low dispersion of earnings estimates. Studies have shown that companies with a history of having analyst earnings estimates that are closely grouped together (low dispersion) accompanied by a high degree of accuracy outperformed the S&P 500 by up to eighteen percentage points per year. The reason given for this: companies that are performing well and have a bright future are more likely to give accurate and complete information to analysts. The result is analyst earnings estimates are similar and more accurate than normal.

On the other hand, companies having operational difficulties tend to be less open with information, which leads to a wider spread in analyst estimates. The wider spread causes optimists to focus on the extreme estimates on the high end, and they bid up the price of the stock. Pessimists will focus on the extreme lower estimates, but are less likely to short the stock (and therefore balance out the optimists) because of regulatory and psychological constraints.

***

Compared to our High-Yield Value Stock Portfolio, this portfolio will likely have:

  • Less volatility
  • Lower turnover
  • Slightly lower returns

Cautious stock investors will likely want to have a portfolio comprised of both large and small stocks. Extremely cautious investors may wish to opt only for larger stocks and mutual funds that invest only in large companies. Aggressive investors may want to invest mostly in small stocks, realizing that to benefit from the higher growth potential of these smaller stocks, they have to take on additional risk.

An investor will ideally invest an equal amount into each of these stocks. We recommend investing at least $100 into each stock. If you use a discount broker (and some occasionally try a zero-commission business model), your annual commissions could be less than what many full-service brokers charge for one trade.

For those that can't afford to invest in all of the stocks, we recommend investing in the stocks that have most recently been recommended or starting with one of the mutual fund portfolios (available here).

Remember, the more stocks and industries you invest in, the greater your diversification and safety. So beware having your whole portfolio invested in only a handful of stocks. However, if your goal is to beat the market, you have to be careful not to take diversification too far. If you took diversification to the extreme, you would buy all of the stocks available in the stock markets. You would then obviously achieve returns that would match the market, thereby negating the goal of beating the market. We attempt to design this portfolio to have enough stocks and industries to provide the optimum amount of diversification to earn high returns while providing adequate safety for long-term investors.

As always, keep in mind that investing in individual stocks or mutual funds involves risk. Past performance is never a guarantee of future performance.

Performance Since Inception1

Total Return
High-Dividend Blue Chip Stock Portfolio:
921.1%
S&P 500:
166.1%

Average Annual Return
High-Dividend Blue Chip Stock Portfolio:
17.6%
S&P 500:
7.1%

1Inception: May 5, 2003. Data last updated September 9, 2017.

 
Current Holdings
 

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