The Defensive Dividend Aristocrats rallied again and outperformed the S&P 500 index last month.
US equities continued their rally in July, the S&P 500 gained 5.6% and the Dividend Aristocrats followed closely with 5.13%. The investors struggled a bit mix signals, weak macroeconomic data, concerns on the COVID-19 virus combined with Fed stimulus, and some strong earnings, especially from big techs. For the first time since the peak in February, the S&P 500 index is again above the closing of the end of last year. Year-to-date the S&P 500 is now up +2.38%.
The Defensive Dividend Aristocrats rallied again and gained 6.3% after the paused in June, and the total return is now 3.31% in 2020. The defensive version is outperforming the dividend aristocrats and the S&P 500 index.
Roper Technologies (ROP) and McCormick & Company (MKC) are the top (defensive) performers in 2020, while VF Corp (VFC) and Chubb (CB) are laggards.
The defensive approach
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
Aspects such as dividend yield or dividend growth are not taken into consideration in this approach.
Read more on: Defensive Aristocrats methodology
Performance Update July 2020
The Defensive Dividend Aristocrats are up +6.3% in July after gaining almost 18% in the second quarter of 2020, and the total return is now +3.31% in 2020. The Defensive Dividend Aristocrats are outperforming the S&P 500 and the US dividend aristocrats. The table below lists the monthly and annual performance.
Members can use the screener to find the current best dividend aristocrats based on loss-ratio.
