What are we looking for?
An investing approach that offers balance and diversification.
Dividend investors like companies that offer predictable and growing payouts. Growth investors focus on businesses that can rapidly expand their revenues and profits. Both strategies can work, but both go through lean periods. Combining both approaches may produce more consistent returns than following either one alone.
How we did it
Craig McGee, senior consultant at CPMS Morningstar Canada, gave us a look at the CPMS U.S. Double 10 Dividend and Earnings Growth strategy, a model that can hold up to 20 stocks, with 10 stocks selected from the CPMS U.S. Dividend Growth strategy and 10 stocks selected from the CPMS U.S. Earnings Growth strategy. In the combined portfolio there are a maximum of five stocks allowed in any one industry group. The model attempts to diversify between stocks with high expected dividend growth and stocks with high returns on equity, among other criteria.
The attached list shows the 20 current holdings in the pooled strategy, sorted in alphabetical order.
More about Morningstar
Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia. Its research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers. CPMS data cover more than 95 per cent of the investable North American stock market.
What we found
Outsized returns: So far this year the model has posted a total return of 50 per cent while the S&P 500 Total Return Index is up 30.2 per cent. Since Dec. 31, 1993, the model portfolio has generated an annualized total return of 14.4 per cent versus 9.1 per cent for the S&P 500 over the same period.
Remember, though, that strategies that worked in the past aren't guaranteed to succeed in the future. Do your own research before buying any of the stocks listed here.