The Defensive Dividend Aristocrats objective is to outperform the Dividend Aristocrats over any five-year rolling time horizon, especially in bear markets. The maximum draw-down (mdd) should be lower.
The idea of the Defensive Dividend Aristocrats is to invest in 10 Dividend Aristocrats that are selected based on price-return and risk-ratios at year-end. Combined with the dividend growth characteristics of all Aristocrats, this should result in a comfortable set of companies for a long-term dividend portfolio.
The Defensive Aristocrats are selected on performance-based criteria:
- Geometric Annual performance of the last 10 years (GeoAP10)
- Win-ratio, the chance of a positive monthly performance (over 7000 calculations)
- Loss-ratio, the chance of a monthly loss multiplied by the weighted average loss
We created the Defensive Dividend Aristocrats so customers can follow a selection of dividend aristocrats. Some investors could mirror the portfolio holding for holding, but others use the list to generate investment ideas and make sense of trends in their own portfolios.
If you decide to mirror the portfolio, our recommendation would be to invest equally across all holdings. One should always be aware that 10 stocks only is probably not sufficient with respect to diversification. Some holdings may appear undervalued and some overvalued since the 10 dividend stocks are selected once per year.Member can analyze up-to-date performance-based criteria of all dividend aristocrats
The diagram below shows that the “blue” stock should be preferred over the “yellow” since the performance (Geometric Annual performance of the last 10 years) is higher and the risk (Loss-ratio) is lower.
The 10 Dividend Aristocrats with the best performance-risk characteristics and in an up-trend are selected at every year-end for the holding period of a year, to be part of the defensive dividend aristocrats.
The diagram below shows an example of dividend aristocrats plotted with the performance and risk valuation.
Over the period January 2014 – end December 2018, the CAGR of the defensive Aristocrats has been 11.15%, outperforming the dividend aristocrats (NOBL) with 2.46%.
An initial invested amount of $ 10,000 would have been $16,968 by end of 2018. A major difference with an investment in the Dividend Aristocrats ETF(NOBL), $15,167.32
Below an overview of the selected defensive aristocrats over the period 2014-2018.