The Dividend Investing Blog

There have been a number of great posts around the dividend blogging nation recently about the S&P High Yield Dividend Aristocrats Index.  The Index consists of companies from the S&P Composite 1500 that have raised dividends for 25 consecutive years or longer.  There is an exchange traded fund, SPDR S&P Dividend (SDY), that tracks this index.  However, SDY has a 0.35% expense ratio and a 40% turnover.  I want to try to make my own index fund from the Dividend Aristocrats.  I know what you are thinking, “How are you going to do that?”.  Well, just sit right back and you will hear a tale.

If you follow my articles, then you know the brokerage for my taxable investments is FOLIOfn.  I pay one flat annual fee ($290) in exchange for unlimited free window trades and unlimited Folios.  Folios are like folders you can create and fill with stocks.  You can also set target weights for each of the stocks in the Folio.  Therefore, you can create your own Folio to track an Index.  (I see that look of understanding spreading across your face now.)

I can create my own Folio full of Dividend Aristocrats and I can set target weights for each stock.  The trades will be free.  The Dividend Aristocrats Index sets equal weights to all stock in the Index, so setup will be very simple.  No problem, right?  Wrong.  I ran into one small problem.  You can’t have more than 50 stocks in a Folio.  The current list of Dividend Aristocrats has 60 stocks.  What to do?

I decided to build a spreadsheet with all the Dividend Aristocrats and choose a subset.  I wondered if I should consider beta?  Price-to-earnings ratio?  Yield?  In the end, I decided to sort the list by the dividend yield. 

Next, I needed to decide how many to choose from the list.  Fifty would probably not be a good number since 50 is the minimum target number for the Dividend Aristocrats.  I need to make sure we will always have at least X number of stocks.  Let’s pay homage to Casey Kasem and choose the top 40.  Now we have our Folio, the Thoroughbred High Yield Dividend Folio!

Here are the rules:

• Only the top 40 companies (ranked by yield) will be selected from the Dividend Aristocrats Index.
• I will only re-balance around the annual anniversary date.
• Sell losers before the annual anniversary date.
• Sell winners after the annual anniversary date.
• Buy new shares in respective stocks on the next available date after the final sale.
• All stocks will be weighted equally.

I will purchase Thoroughbred shares on Monday.  I hope to have a new page on the web site to track the progress soon.

Disclosure: Author is long Johnson & Johnson (JNJ), Regions Financial Corp. (RF), Bank fo America (BAC).

The Thoroughbred High Yield Dividend Folio

• (KEY: 12.00, +54.64%, Yield: 16.79%)
• (RF: 11.40, +28.96%, Yield: 14.03%)
• (FITB: 12.86, +18.31%, Yield: 10.86%)
• (CMA: 29.13, +18.17%, Yield: 10.63%)
• (BAC: 26.22, +15.05%, Yield: 11.23%)
• (BBT: 34.45, +8.85%, Yield: 4.39%)
• (LEG: 18.40, +0.05%, Yield: 5.44%)
• (USB: 31.20, -0.16%, Yield: 5.44%)
• (TEG: 45.52, +0.37%, Yield: 5.89%)
• (PFE: 17.19, +3.06%, Yield: 7.49%)
• (ED: 40.29, -1.88%, Yield: 5.69%)
• (GCI: 13.20, +3.45%, Yield: 12.54%)
• (PBI: 26.74, +3.60%, Yield: 4.54%)
• (CINF: 23.90, +4.50%, Yield: 6.67%)
• (SNV: 9.84, +10.44%, Yield: 159.52%)
• (MTB: 78.79, +13.20%, Yield: 4.02%)
• (VFC: 59.04, -5.55%, Yield: 3.71%)
• (AVY: 36.33, -4.09%, Yield: 4.33%)
• (LLY: 34.98, -2.45%, Yield: 5.12%)
• (KMB: 60.05, -0.10%, Yield: 3.78%)
• (GE: 20.65, -1.67%, Yield: 5.90%)
• (PPG: 50.28, -1.39%, Yield: 4.08%)
• (ROH: 70.64, +0.73%, Yield: 2.22%)
• (ADP: 35.51, +2.04%, Yield: 3.33%)
• (BUD: 62.50, -2.24%, Yield: 2.13%)
• (JNJ: 64.74, +3.29%, Yield: 2.79%)
• (MCD: 55.81, -2.52%, Yield: 4.59%)
• (CLX: 58.17, -2.73%, Yield: 2.78%)
• (SWK: 36.27, -0.25%, Yield: 3.44%)
• (FDO: 24.84, -1.27%, Yield: 1.95%)
• (ABT: 54.97, +1.40%, Yield: 2.59%)
• (MMM: 59.72, +0.17%, Yield: 3.32%)
• (CB: 45.10, +1.12%, Yield: 2.87%)
• (KO: 43.78, -7.36%, Yield: 3.13%)
• (EMR: 37.06, -3.79%, Yield: 3.12%)
• (SHW: 53.84, +1.36%, Yield: 2.57%)
• (NUE: 34.30, -12.70%, Yield: 5.52%)
• (PEP: 54.18, -12.29%, Yield: 2.59%)
• (WWY: 0.00, N/A, Yield: N/A%)
• (PG: 63.83, +0.85%, Yield: 2.37%)