Thursday, September 8, 2022

Return of the Aristocrats

On March 24, 2021, I decided to shift my 100% bond ladder to a dividend growth stock as the bonds matured. That decision was driven by very low yields on all kinds of bonds. Since then, I've made 8 investments using that strategy and 7 have been profitable. I started to have doubts that my strategy, while successful so far, may not have been keeping up with the S & P 500 index, or maybe it was keeping up but was not worth the extra effort and management. So, I went back and calculated how many shares of the S & P 500 I could have bought on each day that I made a stock purchase, then calculated the current value of those shares, and added in all the dividends that would have paid by those shares since then.

Finally, I compared the value of my stock purchases now plus all the dividends that have been paid. It turns out my stocks have outperformed the S & P 500 with dividends reinvested by 23.27%. That's a surprising number and gives me pause to switch back to index only investing. It is true that half of my outperformance was due to one lucky purchase of CVX in 2021. But even excluding the appreciation on that one lucky pick, the portfolio outperformed the index by over 10%. That convinced me to continue with the strategy as long as it remains a winning one. Even a 10% outperformance is worth some midnight oil.

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