In any pursuit, if you have more than one or maybe two goals, they will often start to conflict with each other. We should never confuse desires with goals. For example, it is my goal to create an ever-increasing income from dividend stocks, while it is my desire to beat the S&P 500 index over the long-term.
If I am achieving my goal of creating an ever-increasing income from dividend investment, 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 for me to totally rethink my strategy.
A person that tries to please everyone, usually ends up pleasing no one. In the same vien, trying to achieve your goals and desires may lead you to achieving neither. Consider the following dividend stocks and S&P 500 return YTD through June 30:
- Vanguard 500 Index (VFINX) – June YTD Return: +3.2%
- Procter & Gamble Co. (PG) – June YTD Return: -8.5% – Analysis
- Wal-Mart Stores Inc. (WMT) – June YTD Return: -4.1% – Analysis
- McDonald’s Corp. (MCD) – June YTD Return: -1.4% – Analysis
- Johnson & Johnson (JNJ) – June YTD Return: -1.4% – Analysis
Note, my returns may be different than your due to additional share purchases.
So far this year each of the above companies have under-performed the S&P. Yet, I consider each of these stocks one of my top-shelf dividend stocks. Last year in the face of a significant downturn, MCD and WMT posted gains. I will continue to hold any dividend stock as long as it continues to increase dividends at a respectable pace, irrespective of its performance against the S&P.
My goal is to generate an ever-increasing income stream from dividends. As noted in Saturday’s Progress Report, I have done this in the last 18 of 19 months. My desire is to beat the S&P 500 over time. I beat it by double digits last year. I am trailing slightly this year, but over the last 18 months I am still up. In the end, I will not sell a great dividend stock for under-performing the S&P.
Full Disclosure: Long VFINX, JNJ, MCD, PG, WMT. See a list of all my income holdings here.