Week 39 - $674.25
The week saw yet another positive end as the stock market pushes its upward momentum with signs of increased consumer activity. Yet with new surges of COVID-19 forcing states to roll back on re-openings, the economic situation remains volatile.
Total Report (Since October 11th, 2019)
Positive Performing Sectors
1. Materials (+14.11%)
2. Consumer Staples (+6.94%)
3. Healthcare (+6.45%)
4. Industrials (+0.43%)
Negative Performing Sectors
5. Consumer Discretionary (-0.74%)
6. Financials (-2.35%)
7. Information Technology (-2.70%)
8. Communication Services (-11.87%)
9. Utilities (-16.17%)
10. Real Estate (-24.43%)
11. Energy (-25.59%)
1. Materials (+14.11%)
2. Consumer Staples (+6.94%)
3. Healthcare (+6.45%)
4. Industrials (+0.43%)
Negative Performing Sectors
5. Consumer Discretionary (-0.74%)
6. Financials (-2.35%)
7. Information Technology (-2.70%)
8. Communication Services (-11.87%)
9. Utilities (-16.17%)
10. Real Estate (-24.43%)
11. Energy (-25.59%)
Weekly Report (July 10th, 2020)
Positive Performing Sectors
1. Financials (+2.97%)
2. Communication Services (+1.87%)
3. Consumer Staples (+0.96%)
4. Materials (+0.96%)
Negative Performing Sectors
5. Consumer Discretionary (-0.25%)
6. Healthcare (-0.51%)
7. Industrials (-0.76%)
8. Utilities (-1.86%)
9. Information Technology (-2.20%)
10. Energy (-3.27%)
11. Real Estate (-5.93%)
1. Financials (+2.97%)
2. Communication Services (+1.87%)
3. Consumer Staples (+0.96%)
4. Materials (+0.96%)
Negative Performing Sectors
5. Consumer Discretionary (-0.25%)
6. Healthcare (-0.51%)
7. Industrials (-0.76%)
8. Utilities (-1.86%)
9. Information Technology (-2.20%)
10. Energy (-3.27%)
11. Real Estate (-5.93%)
GICS Sector Performance Ratio - Balanced: From 9:2 (81.82%) to 4:7 (36.37%)
Review
Much of the gains experienced for this week heavily slanted towards technology-based and long-term growth-oriented stocks, signs that a growing interest for remote business models and all-round growth is taking hold. This is opposed to the much older, time-proven and stable investments that have provided many of the staple goods and services that encompass the majority of the U.S. economy, such as the Dividend Aristocrats which saw an overall loss in their stock values. Ross Stores (ROST) became one of the first casualty of the 2020 recession, after it cut its dividend in May and was subsequently removed from the Dividend Aristocrats list after only five months since its inclusion.
Does this mean that a strong, dividend-based portfolio is no longer a valid investment strategy, as evident by the increasing stock values contrasting to that of falling values for dividend investments?
Not quite. Companies with a long history of paying increasing dividends do so because they have nearly exhausted their own investment opportunities and have reached "maturity." That is, their growth phase has slowed to the point where further investment into their business would only yield a fraction of that of their early days, and that simply returning a portion of their profits to shareholders as a result of their maximized potential would bring more value for the company than to exhaust great sums for little gain.
In this sense, dividend-focused investments are a more accurate representation of the state of the economy than growth stocks, as the growth of stock prices are driven purely by the willingness of other investors for pay for the same investment, and thereby risk speculation. Investments driven by dividends must at its core provide a stable source of revenue to both maintain its business and pay its share of the profits toward shareholders virtually in perpetuity. Without a healthy economy to ensure profits, dividend-paying companies suffer. As a result, it is expected that a dividend-based strategy would under-perform during a downturn based heavily on stock value.
However, it is also known that downturns are how dividend investments outperform growth investments. Because dividends rely on the number of stocks owned and not the stock value, a drop in stock value is encouraged over stock gains. This provides a considerable opportunity to obtain higher amounts of shares than would normally be provided during a growing economic environment.
There will be further drops in the upcoming months as cases of COVID-19 continue to spike and force reversals of state re-openings, and as such, continuing to invest into sound companies during this time will prove lucrative to future prospects after the crisis is over and the economy begins its recovery.
Does this mean that a strong, dividend-based portfolio is no longer a valid investment strategy, as evident by the increasing stock values contrasting to that of falling values for dividend investments?
Not quite. Companies with a long history of paying increasing dividends do so because they have nearly exhausted their own investment opportunities and have reached "maturity." That is, their growth phase has slowed to the point where further investment into their business would only yield a fraction of that of their early days, and that simply returning a portion of their profits to shareholders as a result of their maximized potential would bring more value for the company than to exhaust great sums for little gain.
In this sense, dividend-focused investments are a more accurate representation of the state of the economy than growth stocks, as the growth of stock prices are driven purely by the willingness of other investors for pay for the same investment, and thereby risk speculation. Investments driven by dividends must at its core provide a stable source of revenue to both maintain its business and pay its share of the profits toward shareholders virtually in perpetuity. Without a healthy economy to ensure profits, dividend-paying companies suffer. As a result, it is expected that a dividend-based strategy would under-perform during a downturn based heavily on stock value.
However, it is also known that downturns are how dividend investments outperform growth investments. Because dividends rely on the number of stocks owned and not the stock value, a drop in stock value is encouraged over stock gains. This provides a considerable opportunity to obtain higher amounts of shares than would normally be provided during a growing economic environment.
There will be further drops in the upcoming months as cases of COVID-19 continue to spike and force reversals of state re-openings, and as such, continuing to invest into sound companies during this time will prove lucrative to future prospects after the crisis is over and the economy begins its recovery.
Portfolio Update
The S&P 500 Dividend Aristocrats list has been updated for 2020. 1 company has been removed following a dividend cut in May:
Consumer Discretionary (1)
Ross Stores (ROST) - Specialty Retail
Last Week's Update (July 3rd, 2020)
M1 Finance Platform Referral Link: https://m1.finance/UIl_N9XNA_CO
M1 Finance Dividend Aristocrats 2020 Pie: https://m1.finance/quB1JH2k6
M1 Finance Platform Referral Link: https://m1.finance/UIl_N9XNA_CO
M1 Finance Dividend Aristocrats 2020 Pie: https://m1.finance/quB1JH2k6
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