8 Dividend Stocks Passing Vigorous Fundamental, Yield and ESG Criteria

December 25th, 2019

We relied upon the extensive research of institutional ETF sponsors and the rules-based strategies they follow to identify individual stocks demonstrating multi-dimensional strength. 

Eight stocks pass these filter criteria:

  • Held by Vanguard multi-factor fund (VFMF) which selects stocks for value, quality and momentum within the Russell 3000
  • Held by Vanguard value factor fund (VFVA) which selects stocks within Russell 3000 for value — giving the filter an value bias
  • Held by Vanguard high dividend yield fund (VYM) which tracks the FTSE High Dividend Yield Index
  • Paid and increased dividend each year for at least 5 years
  • Held by Vanguard ESG fund (ESGV) which is based on the Sustainalytics service which uses “traditional” ESG criteria 
  • Held by Goldman Sachs fund (JUST) which tracks non-traditional ESG-types of criteria based on surveys of what the general population wants to see in a business
  • Were seen technically as of 12/24/19 by BarChart.com as clear Buy ratings
  • Have a 12-month trailing distribution yield of at least 3% according to BarChart.

For reference, here is the 1-year performance of the ETFs we used as data sources, compared to the performance of SPY (S&P 500).

These are the 8 stocks:

  • AT&T (T) 5.22% yield
  • Verizon (VZ) 4.01% yield
  • Huntington Bancshares (HBAN) 3.97% yield
  • Keycorp (KEY) 3.65% yield
  • Regions Financial Corp (RF) 3.61% yield
  • Citizens Financial Group (CFG) 3.56% yield
  • Metlife (MET) 3.45%
  • First Horizon National Corp (FHN) 3.38% yield

All but Verizon outperformed the Vanguard Multi-Factor fund over 1 year.  First Horizon nearly matched SPY performance.  All the other stocks outperformed SPY.

Five-year monthly, dividend adjusted price charts for the 8 stocks, show the stock in black; the performance relative to the S&P 500 (SPY) in red; and the Dollar amount of dividends paid in the lower panel in green.

(click images to enlarge)

Here is how Morningstar describes them quantitatively:

Market-Cap / Yield / Growth


Forward Valuation

Valuation Multiples vs Historical Averages from AAII

Operational Data from AAII

Insider and Institutional Purchases from AAII

These are the analyst views as presented by MarketScreener:

As a yield seeking investor, with an expectation that the value factor will do OK over the long-term, I may acquire some of these stocks in small size for the tactical sleeve of my portfolio.

I principally invest in funds for diversification, but sometimes tactically invest in a limited number of individual stocks in small size.

We all need a claim on the upside, but also need a solid element of protection.  Above average yield from value stocks with a modicum of momentum may provide some of that claim and some of that protection.



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October 2nd, 2019

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September 21st, 2019

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Review of Model Portfolios

September 17th, 2019

What’s Inside:

  • 19 model portfolios potentially useful as references from which to design a portfolio suitable for you
  • OWN / LOAN / RESERVE and sub-class composition
  • 1-mo, 3-mo, 1-yr, 3-yr, and 5-yr total returns
  • Trailing yield, standard deviation, Sharpe Ratio and maximum drawdown, duration of drawdown, safe withdrawal rate and perpetual withdrawal rate since 1970
  • ETFs representing each of the sub-classes used in the portfolios

These portfolios may be useful to you a starting reference points to design a portfolio best suited to you and your life stage, goals, means, limitations preferences, risk tolerance and other factors.

There are many model investment portfolios, perhaps too many, model portfolios to be found.  The could be bewildering.  This is an attempt to present a limited number of portfolios that cover the broad spectrum of investor needs and circumstances.

Before we look at them, remember that asset allocation is a far more important determination of your investment returns and portfolio volatility and periods of maximum drawdown than the specific securities you chose to represent asset categories in your portfolio.


The five steps might be best divided between long-term ideas and intermediate-term to short-term ideas (Investment Policy and Investment Strategy).

Investment Policy:

  • Decide the mixture of the three “Super Classes” OWN, LOAN and RESERVE to use in the portfolio
  • Decide which asset Sub-Classes to include and which to exclude within each super-class for the portfolio (e.g domestic or international stocks or gold or commodities or real estate in the OWN super class)
  • Decide upon the normal, or long-term, weights for each of the Super Classes, and to the Sub-Classes in the portfolio

Investment Strategy

  • Deviate from the long-term policy weights of asset classes up or down (overweight or underweight) in attempt to capture excess return, or to manage portfolio volatility, or maximum drawdown risk
  • select individual securities or funds within an asset class to achieve superior returns relative to that asset class (expense levels are a major contributor to differences in returns for funds)

It is best to commit the Investment Policy to writing, along with other important factors such as goals, means and risk tolerance and other limitations, to serve as a reference and possible behavioral control when markets, news and situations rise your positive or negative anxiety. 

Before doing anything rash or spontaneously, take a deep breath, pull out and read your written Investment Policy, then ask yourself whether what you are about to do is appropriate.  Maybe referring back to that document prepared when your emotions were calm and news flow was normal will modify the action you are about to take.

The portfolio models below deal only with the three steps of Investment Policy.

Note that investment models for pension plans and endowments are of necessity generally different from those suitable for most individuals.  Pensions and endowments are generally presumed to be perpetual, or at least to last longer than a typical human life.

Individuals generally have finite time frames for their portfolios (let’s ignore the ultra-wealthy whose portfolios that may be perpetual).  Individuals go through three broad phases:

  • accumulation with aggressive risk investing with gains priority (early stage years)
  • continued accumulation with moderate risk investing, seeking gains, with some income focus (middle stage years)
  • withdrawal with conservative investing, with income priority at least equal to gains priority and limiting volatility and maximum drawdown risk (late stage years). 

As a result, “glide path” considerations come into play for individuals.  There is certainly variation among institutions and advisors about an appropriate glide path, but the glide path published by Vanguard is somewhat in the middle of the pack. That makes it a useful data point to consider (not to be bound to it, but to consider it when designing a portfolio).

This is their glide path.  I have added the concept of the ratio of Human Capital to Financial Capital to the customary age or years to retirement dimensions as a glide path issue.

Human Capital (“HC”) is the present value of future savings to be added to the portfolio from money earned by work.  Financial Capital (“FC”) is the market value of the portfolio.  The Human Capital-to-Financial Capital Ratio is HC/FC and is an important consideration along the portfolio allocation glide path.

(Click images to enlarge)

19 Model Portfolios:

The tables that follow pursue different levels of risk, or life stage utility as contemplated by their authors:


  • IVY portfolio
  • Pinwheel portfolio
  • Swensen portfolio


  • 3 Fund portfolio
  • Bernstein portfolio
  • Golden Butterfly portfolio


  • Permanent Portfolio
  • Dalio portfolio
  • Swedroe portfolio


  • Bogle 60/40 portfolio

Vanguard Life Stage (age / years before retirement):

  • 35 / -30
  • 45 / -20
  • 55 / -10
  • 65 / 0
  • 75 / +10

Vanguard Risk Levels:

  • Aggressive Growth
  • Moderate Growth
  • Conservative Growth
  • Income

This table shows these metrics for the portfolios:

  • OWN / LOAN / RESERVE allocation
  • # of positions in the portfolio
  • Total return: 1 mo, 3 mo, 6 mo, 1 yr, 3 yrs and 5 yrs
  • Trialing 12-month trailing yield
  • 3-year standard deviation
  • 3-year Sharpe Ratio (basically return over risk)
  • Maximum drawdown in last 6 years

This table for the same 19 models, repeats the very important OWN, LOAN, RESERVE Super Class allocation, then shows key sub-class allocations between US stocks, International Stocks, US Bonds, International Bonds, Cash and Other.

In this chart we have selected an ETF to represent each of the sub-classes that each model specifies, showing the percentage allocation per sub-class.

In this last table, for all but the Vanguard models, you see these performance dimensions of each portfolio since 1970, as rendered by portfoliocharts.com.

The two most obvious findings are that the Classic John Bogle 60/40 portfolio consisting of 60% S&P 500 and 40% US Aggregate Bonds has the least attractive history; and the Golden Butterfly has the most attractive set of long-term metrics.

Pinwheel has the highest average return and the most attractive overall metrics set in the Growth group. 

Golden Butterfly has the highest average return and the most attractive metrics set in the Moderate group. 

Permanent may have the most attractive set in the Conservative group, but does not have the highest average return (4.8% versus 5.3% for the other two).  Dalio has a 5.3% average return, a better maximum drawdown than Swedroe, but a 10-year duration of the maximum drawdown versus only 5 years for Permanent.

The long-term metrics for the models are (in order):

  • Average Return Since 1970
  • Baseline 15-Year Return*
  • Baseline 15-Yr / Av Since 1970
  • Baseline 3-Year Return*
  • Standard Deviation
  • Ulcer Index
  • Deepest Calendar Drawdown
  • Longest Drawdown (yrs)
  • Safe 30-Yr Withdrawal Rate
  • Perpetual Withdrawal Rate

* Baseline excludes the worst 15% of annual periods.

“Ulcer Index” measures short-term downside risk (depth and duration of price declines), over 14 days in this case.

Note: Golden Butterfly is data mined since 1972, whereas the others were developed using data from periods ending various multiple years ago and/or are based on investment logic.

Note: Swensen revised his model a few years ago to increase emerging markets to 10% and reduce real estate to 15%.

These are the ETFs used as proxies for the sub-classes in the portfolios to generate the short-term metrics, sub-class and sector composition via Morningstar.  PortfolioCharts.com used other data to generate the long-term metrics from 1970.

Total US Stocks VTI
Large-Cap Value SPY
Mid-Cap Blend MDY
Small-Cap Blend IWM
US Small-Cap Value VBR
Developed ex US VEA
International VXUS
International Small-Cap Value DLS
Emerging Markets VWO
Emerging Markets Value DEM
Equity REITs VNQ
Gold GLD
Commodities DBC
Aggregate US Bonds BND
Aggregate Int’l Bonds BNDX
ST Inflation Protected Treas. VTIP
Long-Term Treasuries TLT
Intermediate-Term Treas. IEF
Short-Term Treasuries SHY
Cash BIL

There are many more portfolio models, but these are a good departure point for thinking about what may be best for you.


Cautionary Country and Region Economic Conditions

September 15th, 2019

What’s Inside:

  • Purchasing Managers’ index for selected countries and regions
  • Long-term PMI trend lines
  • World Bank GDP growth forecasts by country and region
  • Valuation metrics for ETF proxies for selected countries and regions
  • 3-Year monthly return chars with trend lines for proxy ETFs

Purchasing Managers’ Index

The PMI (Purchasing Managers’ Indexes) around the world forecast weak growth to negative growth in manufacturing, and weak to moderate growth in services over the near term; with the composite of manufacturing and services forecasting weak growth. 

PMI is based on a monthly survey of businesses to gauge current conditions and trend.  It is a short-term coincident indicator with short-term forecasting utility.  Once plotted in a long-term chart, the PMI may have intermediate-term trend forecasting utility.

The index centers around 50 and ranges from 0 to 100.  Values above 50 indicate growth and values below 50 indicate contraction.

In the table above, pink shaded cells show contraction; and bold red values indicate the current index value is lower than the prior monthly value.

United States manufacturing is hovering just above the growth flat line, as does services.

The Eurozone is in clear manufacturing contraction, but with moderate services growth.

China manufacturing is barely growing after slightly contracting.  Its services are in mild growth.

Japan manufacturing is in contraction, and services are growing modestly.

Germany is in strong manufacturing contraction, and services are growing moderately.

United Kingdom is in manufacturing contraction, and services are barely growing.

World and United States PMI Trend Lines

This world composite PMI trend line shows the world slowing.

This USA manufacturing PMI trend line shows the USA slowing and at the lowest rate of manufacturing growth since 2013

This USA services PMI shows the USA slowing.

These trend line charts are from Trading Economics.

World Bank GDP Growth Forecasts

The World Bank sees GDP growth slowing (not declining but growing more slowly) in 2020 compared to 2019 in the United States, Euro Area, Japan and China.

It sees GDP growth increasing in Brazil, Mexico and India.

China and India have the highest expected 2020 growth rate among the listed countries at 6.0% and 7.5% respectively.  That compares to expected GDP growth in the United States of 1.6%; Euro Area 1.3% and Japan 0.6%.

This chart looks at the year-over-year GDP growth rate of the selected countries and regions.

This chart compares the GDP growth rate of the selected countries and regions each year.  China and India have been the clear growth leaders.

Comparative Metrics of Proxy ETFs for the Countries and Regions

It is important to preface this information with a note that the GDP growth rate of each country or region has different correlations to the performance of the stocks listed there.

For example, a country whose broad stock market has a high percentage of globally diversified listed stocks (e.g Switzerland or the Netherlands) may correlate more with the World GDP growth rate than the local country GDP growth rate; while a country whose broad index has mostly local operators (e.g. Vietnam) may correlate more with the local GDP growth rate.

The economy and the stock market are two different things at any given moment, but ultimately they tend to relate to each other over the long-run.

The Euro Area and Mexico have the highest current dividend yield among the selected countries and regions; while Brazil and Mexico have the highest cash flow yield (cash flow divided by price).  However, when normalized relative to the debt level of US stocks, Japan, China and Mexico have the highest cash flow yields.

Mexico and the United States have the highest expected earnings growth rate over the next 12 months. 

Looking backwards three years, the United States and Japan have the lowest level of price volatility.

Proxy ETF Trends

These charts show the monthly total return and the 10-month moving average (equivalent to the 200-day average) of proxy ETFs for the selected countries and regions.

The USA is in a long-term up trend.  Brazil has been in an up trend for about a year.  World stocks and Euro Area stocks are beginning to form an intermediate up trend line.  

Japan has made a serious break above its trend line, which has itself has not yet turned up.

India’s trend line is slightly positive, but the price is below the trend line.

China has just begun to turn up the tip of the trend line.

Mexico’s trend line is still pointing down, but the price is slightly above “trying” to reverse the trend direction. 

Symbols Explored in this Note:





USD Reserve Currency Status Eroding Slowly But Surely

July 1st, 2019

Wall Street Journal reported a few days ago:

Secretary General of the European External Action Service (EEAS), Helga Schmid, held a meeting to announce that Europe has found a way of circumventing U.S. sanctions on Iran. The meeting was attended by representatives of China, France, Germany, Russia, the United Kingdom, and Iran.

The governments of France, Germany and the United Kingdom have developed a special purpose vehicle called INSTEX to enable European businesses to maintain non-dollar trade with Iran without breaking U.S. sanctions.

INSTEX bypasses SWIFT, which includes US banks and US Dollars, was operating and processing transactions on Jun 28.

Bypassing SWIFT is intended to allow those trading with IRAN to avoid US ability to veto transactions because INSTEX does not involve US banks or US Dollars.

INSTEX is open to all EU member states and there is a mechanism in place or contemplated that would allow non-EU states to join (read that China, Russia and others).

China has already been arranging to purchase oil in exchange for their own currency instead of US Dollars.

These two measures are inflection points that  indicate the potential eventual end to the near total dominance of the US Dollar as the world’s reserve currency. More such arrangements may come into play if we over-use our banking system and our currency as a bludgeon to implement and enforce our foreign policy, when our allies are not on our side.

If the US Dollar loses that reserve currency status, we may find that our ability to fund our continual and even increasing national deficit becomes limited in the amount of Treasury debt we can sell, or the price we must pay to borrow the money. Either way, a major change in our way of life and in our markets would surely follow — most likely quite unpleasant.

Of this, ZeroHedge said, “…once those who benefit the most from the status quo openly revolt against it, the countdown to the end of the USD reserve status officially begins.”

This is what Allianz Global Investors said a year ago:

The US dollar has long been the currency of choice for banking and trade, and for valuing all other currencies. This has brought the US enormous economic benefits and significant structural downsides. Yet a shift away from the dollar may have begun, which could help the global economy in the long run.

Key takeaways

  • In years past, the denarii, ducat, guilder and pound each took a turn as the world’s reserve currency. Today, it’s the US dollar. Will the euro, renminbi or yen be next?
  • Central banks hold fewer US dollars than they did in 2004, and fewer international payments are being settled in dollars
  • If the dollar were to eventually lose its reserve status, its exchange rate could fall, US interest rates could suffer, and US equities and fixed income could potentially underperform

Mark Carney Bank of England Governor said this six months ago:

“I think it is likely that we will ultimately have reserve currencies other than the U.S. dollar. … the evolution of the global financial system is currently lagging behind that of the global economy … for example, emerging-market economies’ share of global activity is now 60%, but their share of global financial assets lags behind at around one-third.” He added that half of international trade was meanwhile invoiced in U.S. dollars, even though the U.S. share of international trade was only some 10%. He said further,“As the world re-orders, the disconnect between the real and financial is likely to reduce, and in the process other reserve currencies may emerge.”

Carney does not predict a rapid change, but an inevitable one.

What makes a currency a reserve currency?

Wolf Street pointed out 3 months ago:

“The degree of dominance of the US dollar as global reserve currency is determined by the amounts of US-dollar-denominated financial assets – US Treasury securities, corporate bonds, etc. – that central banks other than the Fed are holding in their foreign exchange reserves. The dollar’s role as a global reserve currency diminishes when central banks shed their dollar holdings and take on assets denominated in other currencies.”

In Q4 2018, central bank holdings of other countries currencies was as follows:

  • Dollar: 61.7%
  • Euro: 20.7%
  • Japanese yen: 5.2%
  • UK pound sterling: 4.4%
  • Chinese renminbi: 1.9% (record)
  • Canadian Dollar: 1.8%
  • Australian dollar: 1.6%
  • Swiss franc: 0.15%
  • Other: 2.48%

The Euro was zero a couple of decades ago, and the USD was a little over 70% at that time.

The USD share has been a lot worse at 46% in 1991, and we are still the reserve currency, but as China trades it own currency for oil with Iran, and the EU INSTEX facility trades non-Dollar with Iran, key adverse trend development is evident.

If nations increase trading in non-Dollar ways, the percentage of other (non-Fed) holdings of US Dollars will decline, and with it our reserve currency status.

QUARTZ reported on the history of reserve currencies 18 months ago:

A team led by Barry Eichengreen said, “From this vantage point, it is the second half of the 20th century that is the anomaly, when an absence of alternatives allowed the dollar to come closer to monopolizing this international currency role,” 

For at least 70 years, the US dollar has been the world’s dominant currency. …This dominance is historically unusual … Eichengreen and his co-authors find that reserve currencies can and do coexist. … In the future, the dollar will be forced to share prominence with the yuan and the euro, in particular. …

…If the policies of the governments and central banks responsible for these currencies remain sound and stable, this can be a smooth evolution. On the other hand, if there is some kind of policy shock… it’s possible to imagine things suddenly changing. …

…There are four things you need in order for your currency to play a global role: size, stability, liquidity, and security. …

…The optimistic path is where globalization continues at a more measured pace than in the recent past, supported by a global financial system that rests on three pillars—the dollar, the euro, and the renminbi.

The pessimistic scenario is that that progress is too slow and something happens to derail confidence in the dollar. Meanwhile, the euro and the renminbi have not had time to step up and a global liquidity crisis develops that takes globalization down with it. We are more inclined towards the first scenario, but we think it’s worth worrying about the second.

The Balance profiled the current Dollar dominance 3 months ago:

The relative strength of the U.S. economy supports the value of its currency. It’s the reason the dollar is the most powerful currency. Around $580 billion in U.S. bills are used outside the country. That’s 65 percent of all dollars. That includes 75 percent of $100 bills, 55 percent of $50 bills, and 60 percent of $20 bills. Most of these bills are in the former Soviet Union countries and in Latin America. They are often used as hard currency in day-to-day transactions.

Cash is just one indication of the role of the dollar as a world currency. More than one-third of the world’s gross domestic product comes from countries that peg their currencies to the dollar. That includes seven countries that have adopted the U.S. dollar as their own. Another 89 countries keep their currency in a tight trading range relative to the dollar.

In the foreign exchange market, the dollar rules. Ninety percent of forex trading involves the U.S. dollar  … Almost 40 percent of the world’s debt is issued in dollars. As a result, foreign banks need a lot of dollars to conduct business.

In 2009, a big panic year, China and Russia called on the IMF for a new global currency based on a basket of national currencies. China was concerned that the trillions it holds in dollars would be worthless if Dollar inflation set in as a result of increased U.S. deficit spending and printing of U.S. Treasurys to support U.S. debt.

[QVM note] It’s been ten years and it hasn’t happened, but the idea is still out there.   On the other hand our liberal use of  Dollar trading sanctions against our allies over Iran, is weakening our alliances and strengthening efforts to supplant the Dollar.]

Dollar (UUP), Euro (FXE), Yen (FXY) and Yuan (CYB) are key currencies in this discussion.