{"id":34846,"date":"2012-12-28T11:24:30","date_gmt":"2012-12-28T16:24:30","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=34846"},"modified":"2012-12-30T23:00:45","modified_gmt":"2012-12-31T04:00:45","slug":"make-dividend-achievers-a-core-holding-in-2013","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/12\/28\/make-dividend-achievers-a-core-holding-in-2013\/","title":{"rendered":"Make Dividend Achievers a Core Holding in 2013"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

High dividend stocks were all the rage in 2011 and 2012, as yield-starved investors hunted for income where they could find it.<\/p>\n

Yet two of the sectors best known as \u201chigh yield\u201d sectors\u2014utilities ($<\/span>XLU<\/a>) and telecom ($<\/span>XTL<\/a>)\u2014are on track for a sub-par 2012 (the utilities sector is actually negative for the year).\u00a0 It\u2019s not particularly hard to see why. \u00a0For slow-growth sectors, both have become expensive relative to the broader market.<\/p>\n

Utilities yield just over 4% as a sector, which is nearly double the yield on the S&P 500 and more than double the yield on the 10-year Treasury.\u00a0 But in terms of cash payout, you\u2019re not going to be getting significantly more next year than you did this year.\u00a0 Utilities do grow their dividends over time, but they tend to do so slowly.<\/p>\n

Don\u2019t get me wrong; I\u2019d prefer to take a basket of utilities stocks, equity risk and all, over most bonds at current yields.\u00a0 The uncertainty of the equities markets beats the virtually guaranteed losses that bond investors face, particularly after inflation.<\/p>\n

Yet the yield is only part of the story.\u00a0 Dividends are about more than just current income.\u00a0 They are about quality.\u00a0 Which brings me to my recommendation this week: the Vanguard Dividend Appreciation ETF (NYSE: $<\/span>VIG<\/a>).\u00a0<\/strong><\/p>\n

\"\"<\/a><\/p>\n

Fig. 1: VIG vs. SPY<\/p>\n<\/div>\n

For a \u201cdividend focused\u201d ETF, VIG yields a relatively puny 2%.\u00a0 But unlike bond coupon payments or slow-growth utilities or telecom stocks, VIG\u2019s cash payout will almost certainly be significantly higher in the years ahead.<\/p>\n

You see, in order to be a holding of VIG, a company has to have at least ten consecutive years<\/em> of rising dividends behind it.\u00a0 These are growth<\/em> stocks, not cash cows for widows and orphans.<\/p>\n

Yet at the same time, the holdings are generally high enough quality to be held by widows and orphans.\u00a0 Think about it.\u00a0 If you\u2019re able to raise your dividend throughout the 2008-2009 meltdown and recession, your company must be bulletproof.<\/p>\n

VIG is stuffed full of the highest-quality companies in America; Wal-Mart (NYSE: $<\/span>WMT<\/a>), Coca-Cola (NYSE: $<\/span>KO<\/a>) <\/strong>and IBM (NYSE:$<\/span>IBM<\/a>)<\/strong> are its three largest holdings, to drop a few names.\u00a0 And interestingly enough, utilities and telecom together make up less than 2% of the portfolio.<\/p>\n

VIG is not an ETF that I recommend you trade aggressively.\u00a0 VIG\u2014and the stocks that comprise it\u2014is the sort of investment that you should use as the foundation of your core portfolio.<\/p>\n

As we start a new year, consider ditching any S&P 500 index funds you might own and replacing them with VIG.\u00a0 And for the developed international allocation of your portfolio, you might consider the PowerShares International Dividend Achievers ETF (NYSE: $<\/span>PID<\/a>).<\/strong>\u00a0 It\u2019s built on the same principles as VIG but covers developed non-U.S. markets.<\/p>\n

Disclosures: Sizemore Capital is long VIG, WMT and PID. \u00a0This article first appeared on TraderPlanet<\/a>.<\/em><\/p>\n

SUBSCRIBE <\/a><\/strong>to Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

The post Make Dividend Achievers a Core Holding in 2013<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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