Stingray :
The answer to your question as to whether anyone has tried to analyze this approach with a larger group of stocks is "Yes". Refer to James O'Shaughnessy's book, "What Works on Wall Street", in which he uses the "Cornerstone Value Approach". This approach buys the 50 highest dividend-yielding companies from among the larger companies (To give you an idea, currently this set of "large companies" has stocks from 441 companies).
Here is the performance of this approach from 1952-1995.
1952-1995 : Cornerstone Value did 3.86 times better than S&P 500
with a compound annual return of 15.30% vs. 11.90% for
S&P 500.
Taking subsets of this period, consider the "bear market" years of
1969-1981 : CV did 2.02 times better than S&P 500.
And if you want to see how it fared during the "bull market" years of
1982-1995 : CV did 1.50 times better than S&P 500.
And all this, with a Sharpe risk-adjusted ratio of 66.0 for CV
vs. 46.0 for the S&P 500 (The higher the ratio, the better the
portfolio's risk-adjusted return). The standard deviations are
comparable -- 17.12% for CV and 16.77% for S&P 500. And the
highest CV has ever lost in a year is 15% (in 1969) vs. 26.47%
for the S&P 500 (in 1974). [Btw, S&P 500 lost 8.5% in 1969].
Dividends are important, and sooner or later, people will
realize that. However, during a time like this when almost
anything you throw money at goes up, they seem silly, or
even stupid.
And to quote Peter Lynch from "Beating the Street", you can
hardly go wrong if you follow the strategy of purchasing your
stocks from the book, "Moody's Handbook of Dividend Achievers"
(consisting of companies that have raised their dividends for
at least 10 consecutive years) and updating your portfolio
just once a year, throwing away any stock that has moved out
of the Handbook, and replacing it with another one from the
Handbook.
There are a few very good books regarding the importance of
dividends, written by Geraldine Weiss. You might want to refer
to them sometime.
Dipy. |
