We begin by reviewing the performance of last year’s list. The table below highlight various fundamental strategies and their performance using the top 5 companies.
Focusing on the worse performing group, high yield, we see that 5 highest yielding companies lost nearly half of their value. The largest drop of 78% was Alliance Resource Partners (ARLP). At the time of write up, Alliance was trading at $15.47 with dividend yield 14%, figure that appears too good to be true. The stock is now trading around $3.50.
Invesco (IVZ) was trading at $24.10 in 2018 and $15.70 in 2019. Dividend yield in 2019 was at 7.9%, however, that yield didn’t last as Invesco cut its dividend by half. Now the stock is around $10.75 and dipped as low as $6.38 in March of this year. The observation (and perhaps lesson) is to not chase the highest yield as that could be very costly to your portfolio.
On the opposite end of this strategy are low yielding stocks which gained 16.6% for the year. Leading the way for this strategy was Rollins (ROL) with yield of 1.3% at the time of publication. This yield isn’t anything to get excited about but a gain of 68% in one year certainly is.
Second on the performance list is Quaker Chemical (KWR) with yield of 0.9% last year. The stock gained 23% in one year.
If this appears to be counter intuitive to you, then it should. As value investors, we're taught to focus on low P/E, low P/B, or high yield. Our data indicate the opposite might be worth considering.
U.S. Dividend Watch List: August 28, 2020
The market, S&P 500, broke out to all-time high, leaving us a little excitement. There are a handful of companies on our dividend watch list this week. Continue reading →