What if there was a really simple way for investing in dividend stocks and knowing which ones were going to do better than others over the next year? What if all you had to do was just read the expert opinions to know how they were going to do?
That’s the fun little experiment I started about 6 months ago when I bought my last round of dividend stocks to add to my money design. Of course this is NOT how I picked my stocks and I would NEVER advise you do this. There are plenty of other ways to evaluate the assets of a company. All the same though, I thought it might be fun to note the “expert opinions” for each of the stocks I bought earlier this year and see how they did every 3 months are so.
Who knows – could any of these experts get all of them right within a 12 month period? We’ll just have to wait and see.
Why I Like Investing in Dividend Stocks:
One of the privileges of being a personal finance blogger is that I’ve gotten to connect with a lot of other blogs that are really doing well with investing in dividend stocks.
Dividend stocks are a truly passive form of income. You don’t have to do anything to get paid from them other than own them.
The thing I like best about dividend stocks is that even if the share price goes down I’ll still get a dividend payment from the company. It’s kind of like an insurance policy in case things don’t go the way I plan. If the share price goes up, then I get the best of both worlds.
Plus dividend stocks can make a great tool for early retirement. Get enough dividend paying stocks and you could create a large enough passive income stream to support yourself every month for the rest of your life.
In the past I’ve always made this process very simple and simply invested in a group of dividend stocks called The Dogs of the Dow. But this year I did some extra research and purchased 10 reputable stocks that I believed would do well this year.
The Experiment – A Quick Re-Cap:
At the time of my last stock purchase I noticed that every major financial media website had some kind of “expert opinion” or “forecast” type of section.
My natural curiosity begged the question:
Are these forecasts really all that accurate?
I would expect that these analysts are experts and would have a much better grasp on how the stock is going to do over the next 12 months than me, the common investor, would have. But then again it’s proven before that not all stock analysts are always right.
So as a fun experiment during this purchase of dividend stocks I thought I’d note the opinion of each of my picks and track the progress. I decided to use 4 major stock media sources: CNN Money, MSN Money, Yahoo Finance, and Fidelity.
To normalize all of the expert ratings (since each one had their own unique scale), I came up with my own four color rating system. As you’ll notice in almost every situation not all 4 of them agreed.
So How Did My Stocks Do?
Here’s a quick snapshot of my stock portfolio performance:
As you can see my strategy for investing in dividend stocks is currently trailing behind the S&P500 stock market index by about 4 percentage points (5% vs 9%).
That’s unfortunate. But keep in mind that this could change tomorrow. Stocks go up and down every day. To illustrate that point, remember that during my last stock portfolio update my portfolio was beating the index average (3% vs 2%).
Plus I haven’t included my dividend earnings as part of this comparison. That could also tip the scales in the other direction.
Who Were the Biggest Winners?
Cisco Systems and Johnson & Johnson. Both of these stocks have been on a pretty steady upward trail all year. Nice job to Fidelity for identifying both of them as winners. I should also mention that MSN was big on Cisco as well.
Aflac. Unfortunately it’s been a pretty rocky year for Aflac. That’s too bad since MSN and Fidelity seemed to be really hot on it at that time.
Out of all the stocks I bought CNN was very optimistic about both General Electric and Grainger. Both of these companies unfortunately appear to be flat-lining in capital gains this year so far. Fidelity is also guilty since they were very positive about General Electric.
AT&T was forecast to be pretty low by 3 out of the 4 media sites. However shares are up just over 6%. Nice pick CNN.
What Have We Learned So Far?
So can you trust the big media sites to pick your stocks for you?
Here’s the score so far in terms of who was right and who was wrong:
- Yahoo and MSN are tied – 7 points
- Fidelity – 5 points
- CNN Money – 4 points
(One point for each stock you were right about. Green and orange opinions had to be a positive return. Yellow and red opinions had to be a negative return.)
Even though no one has a perfect score, I do think these analyst opinions could be helpful as supplementary data to your other stock picking criteria.
Plus let’s hope my stock portfolio doesn’t continue to lag behind the S&P500 index forever. What’s the fun in investing in dividend stocks if you’re going to worse than an index fund?
Readers – How is your stock portfolio doing so far this year? What do you think of this experiment so far?
Images courtesy of MMD