Image shown: Microsoft’s performance relative to an ETF tracking the S&P 500 (SPY) since the beginning of 2012, the inception of the simulated Dividend Growth Newsletter portfolio.
Almost every dividend-related presentation we made around the country, we talked about how much we liked Microsoft as a dividend growth idea. The stock was originally added to the simulated Dividend Growth Newsletter portfolio at inception at ~$26 per share, and we started the company out as an 8% position! It means the world to us to let you know that Microsoft’s stock has now surpassed $100 per share! Seriously – could we possibly have done any better with our top dividend growth idea out of the gates?
By Brian Nelson, CFA
I really don’t know what to say. My goodness. Microsoft (MSFT).
The company has simply been a fantastic performer in the simulated Dividend Growth Newsletter portfolio these past many years. If you may recall, we used Microsoft as an example with every presentation walking through the tremendous benefits of the Dividend Cushion ratio. Many wrote the software giant off as “dead-money” years ago, but we did nothing but pound the table–and pound the table some more–about how we were huge fans of the company’s tremendous free cash flow generation and balance-sheet health. It probably goes without saying, but we still like shares! For us to turn sour on them, both value and momentum indicators would have to “roll over.”
It was only prudent to reduce exposure to the company when it acquired LinkedIn. But it’s now a $100 stock! Can you believe it? It’s absolutely trounced the market’s returns since inception of the simulated Dividend Growth Newsletter portfolio, too (see image above). When it was added to the newsletter portfolio at the beginning of 2012, Microsoft paid an annualized dividend of $0.80 per share, and now in just a few short years, it pays an annualized dividend of more than double that ($1.68 per share). What an incredible story. A stock whose price has increased nearly four-fold as the company more-than-doubled its dividends-paid-per-share over the same time period! I’m not sure that we could have positioned dividend-growth members better with our favorite idea out of the gates.
I understand that this is the Dividend Growth Newsletter, but if you haven’t read through the analysis of the Best Ideas Newsletter portfolio, I implore you to do so. We’re extremely proud of the simulated Best Ideas Newsletter portfolio’s track record, but if it doesn’t impress you (especially in the context of tremendous underperformance by active management, in general), then you might understand why we have moved to portfolio weighting ranges instead of specific weighting percentages in the newsletter products. The bottom line is that, while we’re proud of our track record, newsletter portfolio success doesn’t necessarily translate to member success, and we care more about member success than anything else. We’re working on conducting similar analysis of the Dividend Growth Newsletter portfolio, but please have a read of the analysis of the Best Ideas Newsletter portfolio:
/Study_Valuentums_Best_Ideas_Newsletter_Portfolio
More recently, the markets have been dealing with some indigestion from a combination of worries about Italy’s (EWI) political environment and sovereign health and modest risk of contagion given Deutsche Bank’s (DB) troubles, but the US equity markets are taking global setbacks in stride. Economic growth and employment levels in the US remain strong, all things considered, and while the Federal Reserve’s ongoing contractionary monetary policy may put a damper on the pace of price appreciation of higher-yielding equities, many of the companies we include in the simulated Dividend Growth Newsletter portfolio have strong fundamentals and generally attractive valuations, if not reassuring technical/momentum indicators. I hope that you enjoy this June edition of the Dividend Growth Newsletter!
<The June edition of the Dividend Growth Newsletter is scheduled for release June 1. View archives.>
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Brian Nelson does not own shares in any of the securities mentioned above. Some of the companies written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.