The list of dividend aristocrats, dividend achievers, or dividend champion is favorite hunting ground most of the dividend focused investors. This list includes companies from S&P500 index or S&P1500 index that have been continuously raising dividends last 25 years or 10 years or more. In general, these are companies that are listed on US markets. The list of companies (and dividend opportunities) will keep churning. It is really difficult to predict which ones will continue to survive for another 10 years or more. As they age, it will be harder for them to sustain their dividend growth momentum. The likelihood of their ability to grow dividend will continue to diminish.
We need to understand dividend growth in the context of growth in US economy. Dividend growth is only possible on the back of growth in corporate earnings. Keeping with the growth of US economy, many of these companies also continued to grow and hence dividends kept increasing. However, investors cannot ignore the current US economy vis-à-vis emerging market economies.
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Few weeks ago, I posted an article earlier which discussed why emerging markets (e.g. BRIC) cannot be clubbed together. There are so many significant differences that it makes sense to look at it individually. Most likely it will also provide maximum possible return for our invested dollars. While China continues to receive most attention in the press, I believe its India that provides a much better option for small individual investors. Following are three reasons I believe India has relatively more fundamental strength than other countries.
- Inward Consumption Based Growth: India’s economy is consumption oriented when compared to other emerging markets. India’s export contributes less than 15% to its $1.2T GDP. The IT outsourcing services and back office has garnered most of the business media coverage; however, these industries have less than 8% contribution to the GDP and employ less than 5 million people. This is an indicator of growth by internal production and consumption. It is less reliant on exports. Quite contrarily, these technology services perform better in recession, because it is all about optimizing operational cost. In addition, its reserve bank (a.ka. central bank) has very conservative monetary policy, which is why we did not see failure of the banks (or banking system) during the current financial melt down. There were no widespread bank bailouts.
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Last week, I presented an update on the monthly progress of my dividend portfolio. In this post, I am discussing the quarterly risk analysis. My objective here to make sure I am continuing to following my risk management process.
- Maintain pre-determined asset class allocation;
- Maintain pre-determined diversification (any sector should not exceed 10%); and
- Dividends from a single stock should not exceed 5% of total dividends.
My dividend portfolio holdings can be referenced in My Portfolio menu at top of this page.
Maintaining Asset Allocation
Chart 1 shows the asset class allocation along with my maximum target limits. In general, I am continuing to meet (or much closer) to my pre-defined target levels. During 3Q09, I did not make any contribution to the emerging markets index funds such as VWO and EPI. This was because I believe they rose too quickly to my comfort level. I am still tad lower than my maximum limit for emerging markets.
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As the stock 
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Investing in ETF – Know What You are Investing In
Example 1: VWO and EEM are funds based on MSCI emerging market select index which is market capitalization based index. It includes 18 to 20 emerging economies where stocks can be bought free of any restrictions.
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