I've gone a bit crazy in recent months rolling out value-based portfolios, unveiling three within three weeks: My "Double-Net Dividends," "Small-Cap Dividend Growers" and "Small-Caps with Cash" portfolios. So far, all three have exceeded my expectations -- including the worst performer of the bunch, the Small-Cap Dividend Growers group.
This portfolio is up 4.4% since inception, beating the Russell 2000 Index's 2.5% gain over the same period and Russell Microcap's +0.1%. That's not an earth-shattering performance, but it ain't bad, either.
Of course, I've written before that as a value investor, I don't expect instant gratification from my investments, nor do I expect all of my ideas to pan out. So, I'll take the portfolio's early gains with a grain of salt.
I launched the Small-Cap Dividend Growers portfolio in early January, based on my theory that dividends represent more than just cash payouts to shareholders. After all, companies can fool investors by "massaging" earnings or announcing stock buybacks and not following through, but actual dividend payouts are hard to manipulate.
So, this portfolio looks for companies that increase their dividends year in and year out regardless of actual yields. As a reminder, here are the portfolio's criteria:
- $500 million to $2 billion in market capitalization.
- Dividend increases in at least each of the past five years.
- Long-term debt-to-equity ratios below 50%.
- Dividend-payout ratios below 50% for the trailing 12 months and last two fiscal years.
More than two dozens stocks made the cut, and 17 names are in positive territory so far. The portfolio's big winners so far:
- Badger Meter (BMI), +25.5% since the portfolio's inception. This water-meter company not only has one of the all-time greatest company names, but also put up solid first-quarter results.
- Franklin Electric (FELE), + 21% since inception. Franklin makes water- and fuel-pump systems, and the stock has rallied nicely off of its January lows. FELE also recently raised its quarterly dividend 2.6% to 10 cents a share.
- Quaker Chemical (KWR), +19.5% since inception. This firm reported both better-than-expected fourth-quarter results and in-line first-quarter ones. KWR should also announce next quarter's dividend this week. The firm boosted the payout 6.7% at this time last year.
Meanwhile, the portfolio's laggards include:
- American Equity Investment Life (AEL), -38.4% since inception. By far the group's worst performer, this annuity company had a rough first quarter. It reported earnings well below consensus estimates.
- Computer Services (CSVI), -6.3% since inception. Not much to report here, and not much trading volume, either.
- Standard Motor Products (SMP), -5% since inception. This auto-parts manufacturer/distributor has actually rebounded nicely following an 18% drop that came after it reported lackluster fourth-quarter in late February. However, SMP is still down since the portfolio's inception date.