Published Fri, 11 Aug 2017 17:40:14 -0400 on Seeking Alpha
Our last dividend article (How to Build a Better Dividend Strategy) analyzed the typical factors used to differentiate "good" dividend stocks from "bad" ones, and ended with some surprising conclusions. Our models showed that including traditional dividend growth or debt factors in our decision making process actually acted as a drag on total returns.
This final article in our Building a Dividend Strategy shows the results of our research: a trading system using 8 simple, readily available factors that has worked well over the long term and also over the last few years.
As usual, we have used the InvestorsEdge.net platform to backtest our trading ideas. Further graphs, charts and statistics, including position data, can be found by clicking here. To access the other versions of the model mentioned in this article, simply click on the history button in the left menu and select the desired version to view.
Here is a chart showing the simulated performance of our dividend model from 2000 until 2017:
You can see that our average returns would have been 18.3% a year, with a maximum drawdown in 2008 of 60%:
Apart from the financial crisis, the model's returns weren't really affected by the dotcom bubble, the 2011 Euro crisis or the 2016 oil price plunge, which is exactly what we want from an income strategy - low volatility. So the headline 60% drawdown figure looks bad, but the strategy's behaviour outside of the great financial... Read more