Back in mid-May, I unveiled my second tracking portfolio of mid-cap dividend growers. Now, I've never been an especially big fan of mid-caps; they are "tweeners" that are not small enough to be small-caps or big enough to be large-caps. That's not to say that there's no money to me made in the space. Indeed, the 2017 Mid-Cap Dividend Growers Portfolio did OK, outpacing the S&P 400 Mid-Cap Index by about 360 basis points.
The criteria for the 2018 vintage were the same as those in previous years:
- $2 billion to $10 billion in market capitalization
- Dividend increases in at least each of the last five years
- Five-year dividend growth rate of a minimum 5%
- Long-term debt-to-equity ratios below 50%
- Dividend payout ratios below 50% for the trailing 12 months and last two fiscal years
- Minimum yield: 1.5%
Twenty-four names made the cut. Nine months in, this group is down about 4% in the aggregate, and is behind the benchmark S&P 400 Mid-Cap Index, which is down 0.7%. The portfolio is about as unexciting as it could be. There are no big winners or losers.
The most notable thing about this portfolio is that two names have been acquired since the May 15, 2018, inception, but neither deal was lucrative:
- ILG Inc. was acquired by Marriot Vacations Worldwide (VAC) for $14.75 a share cash plus 0.165 shares of Marriot Vacations; the deal was completed in September. Assuming the current price of VAC plus the cash, this positon is down about 11%.
- Convergys Corp. was acquired by Synnex Corp. (SNX) for $13.25 a share cash plus 0.1193 shares of SNX; the deal was completed in October. Assuming the current price of SNX and the cash, this positon is up about 2%.
Sixteen of the remaining 22 names have increased their dividends over the last nine months; we'll see if the other six follow suit before mid-May.
The best performers so far are Independent Bank Corp. (INDB) (up 14.5%), Texas Roadhouse Inc. (TXRH) (up 12%) and Assurant Inc. (AIZ) (up 11.5%). Worst performers include Hope Bancorp (HOPE) (down 16%), Ingredion Inc. (INGR) (down 15%), Evercore Inc. (EVR) (down 13.5%) and ManpowerGroup Inc. (MAN) (down 9%). It is quite remarkable in a portfolio of 24 that there have not yet been any extreme performances, either positive or negative.
Here's how the rest have performed so far:
- Snap-On Inc. (SNA) (up 7.5%)
- Robert Half International (RHI) (up 9%)
- Reliance Steel & Aluminum Co. (RS) (down 7%)
- First American Corp. (FAF) (down 2%)
- Prosperity Bancshares Inc. (PB) (down 2%)
- MB Financial Inc. (MBFI) (up 6.5%)
- International Bancshares Corp. (IBOC) (down 4.5%)
- Washington Federal Inc. (WAFD) (down 4.5%)
- Unum Group (UNM) (down 1%)
- Cathay General Bancorp (CATY) (down 3%)
- First Midwest Bancorp Inc. (FMBI) (down 6.5%)
- First Merchants Corp. (FRME) (down 6%)
- WesBanco Inc. (WSBC) (down 5.5%)
- Cheesecake Factory Inc. (CAKE) (down 7.5%)
- MSC Industrial Direct Corp. (MSM) (down 3%)
It sure has not been very exciting so far; perhaps that has to do with the fact that the portfolio is dominated by regional banks, of which there are nine.
