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Dividend Paying Stocks Out-of-fashion?

Finance Portfolio Research & Analysis for Sept. 8-12, 2008

 

From our foundational USA research division and the subsequent USA strategy analysts, the following financial analysis excerpts are from revisions recently completed on USA based investment portfolios:

 

SCR Step 1 – Analysis: From No. D1 (USA) Financial Portfolio Research Revision

[Vanguard (Wgt: MC)] Dividend Appreciation (VIG) vs. [SPDR (Wgt: MC)] S&P 500 (SPY):

(1) Observation – Relative Strength: Results in the relative strength analysis of Dividend Appreciation (VIG) versus S&P 500 (SPY) indicate that the VIG has shifted from a neutral (flat price path) to SPY on a relative basis to one that is positively sloped. However, this is on a rather flat price path. This is an improvement over much of June and July, which showed a strong positive relative strength reflecting the fact that VIG had a price path that did not drop as fast as the price path for SPY.

(2) Observation – Regression: Comparison of the linear regression to the time-series that has a 3-period forward shift finds the following formation: The linear regression is equal to the time-series with the price path slightly above both. Since the linear regression provides the “best fit” to the price path, this has continued neutral implications for VIG. Consolidation seems to be occurring while the economic and financial status is developing.

(3) Observation – Price Performance: Dividend Appreciation (VIG) shows a continuation of neutral price path (flat slope) on fairly weak indicators. This is unchanged from last month.

[Reference Charts: D1-7 (relative strength); AD1A-7a (regression); AD1B-7b (price)]

SCR Step 2 – Implication & Strategy:

(1) Possible Implication: The summary of the stated observations for VIG is Neutral, and has Neutral implications.  We are seeing this neutral observation on most of the dividend based ETFs that we track. Additionally, the neutral stance stretches across all sizes of market capitalization.

 

 

Additional considerations:

First, for most investors, a diversified investment portfolio approach combining stocks, bonds, money market securities, etc., is optimal. While financial diversification cannot protect against a loss from a declining market, it can reduce the volatility of the overall portfolio.

 

Second, with the ongoing shift of pension responsibilities from employer to employee, personal investment success will need to supplement most benefit packages. Thus, a goal of successful investing in a variety of assets becomes crucial in providing a comfortable retirement for yourself and your spouse. In consideration of that goal, studying the information available on this site, which has been kind enough to host our research in this article, will help. At www.StrategicCapitalResearch.com, we provide additional finance educational materials to what you find here in both investment books and videos. Between the two sites, you should be able to find enough information to get started toward achieving your pension investment goals.

 

Third, to the above analysis excerpt, the usual disclaimers apply. Since all Strategic Capital Research publications provide research that is conducted using historical data, a reminder needs to be made that the analysis of past market reactions cannot predict future market actions. In particular, no amount of historical data can predict the sudden changes that occasionally occur in financial markets. Finally, the reference chart numbers refer to both the portfolios and their completed auxiliary analyses that are located at www.strategiccapitalresearch.com/research.html.

About the Author

The SCR Analysts represent the collective voice of the researchers at Strategic Capital Research (SCR). We provide global financial analyses, and subsequent strategies, from countries to companies. Copyright 2007-2008.

[SCR] Research & Analysis with Excerpts at Strategic Capital Research, LLC.

[SCR] Matching R&A Strategies at Strategic Capital Research, LLC.

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