If I am achieving my goal of creating an ever-increasing income stream from dividend investments, I would not drastically change my investing strategy if I were to under-perform the S&P. However, the opposite isn't true. If I were not consistently growing dividend income, but nearly always beating the S&P, it would be time to totally rethink my strategy.
To go a step further, I believe in long term my dividend income will rise AND I will beat the S&P 500. Otherwise, it would not be a realistic desire. This has been the case since I have been publicly tracking my dividend growth portfolio (see year by year results here).
Year to date, my investment in Vanguard S&P 500 ETF (VOO), which I use as a proxy for the S&P 500, was up 39.4% (annualized). Below are several dividend growth stocks with total annualized returns (as of last Friday) greater than 80% that have out-performed the S&P 500 so far this year:
Cincinnati Financial Corp. (CINF) is an insurance holding company that primarily markets property and casualty coverage. It also conducts life insurance and asset management operations. The company has paid a cash dividend to shareholders every year since 1954 and has increased its dividend payments for 58 consecutive years.
Yield: 2.3% | YTD Return: 95.1%
Erie Indemnity Co. (ERIE) is a management services company that provides sales, underwriting, and policy issuance services to the policyholders of Erie Insurance Exchange in the United States. The company has paid a cash dividend to shareholders every year since 1991 and has increased its dividend payments for 28 consecutive years.
Yield: 1.7% | YTD Return: 298.9%
Lockheed Martin Corp. (LMT) is the world's largest military weapons manufacturer, and also a significant supplier to NASA and other non-defense government agencies. LMT receives about 93% of its revenues from global defense sales. The company has paid a cash dividend to shareholders every year since 1995 and has increased its dividend payments for 17 consecutive years.
Yield: 2.6% | YTD Return: 92.7%
Microsoft (MSFT), the world's largest software company, develops PC software, including the Windows operating system and the Office application suite. The company has paid a cash dividend to shareholders every year since 2003 and has increased its dividend payments for 17 consecutive years.
Yield: 1.5% | YTD Return: 82.4%
Universal Health Realty Income Trust (UHT) is a real estate investment trust (REIT) that invests in healthcare and human service related facilities. The company has paid a cash dividend to shareholders every year since 1987 and has increased its dividend payments for 33 consecutive years.
Yield: 3.3% | YTD Return: 126.5%
Note that my returns above include the the timing of current year purchases.
My goal is to generate an ever-increasing income stream from dividends. My desire is to beat the S&P 500 over time. We should never confuse desires with goals. In the end, I will not sell a great dividend stock for under-performing the S&P.
Full Disclosure: Long CINF, ERIE, LMT, MSFT, UHT,
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