Procter & Gamble Makes Shareholders Richer While Ford's European Sales Strengthen

Last May, I announced my intention to create a portfolio that embodied life's basic needs. To that end, over a period of 10 weeks, I detailed 10 diverse companies that I think will outperform the broad-based S&P 500 over a three-year period because of their ability to outperform in both bull markets and bear markets, as well as their incredible pricing power in nearly any economic environment.

If you'd like a closer look at my reasoning behind each selection, just click on any, or all, of the following portfolio components:

Let's look at how our portfolio of basic-needs stocks has fared since we began this experiment.

Company

Cost Basis

Shares

Total Value

Return

Waste Management

$42.60

23.24

$1,017.91

2.8%

Intel 

$23.22

42.64

$1,100.96

11.2%

NextEra Energy

$87.94

11.26

$1,087.72

9.8%

MasterCard 

$64.557

15.30

$1,128.38

14.2%

Chevron

$124.95

7.93

$976.82

(1.4%)

Select Medical

$8.96

110.49

$1,545.76

56.1%

Ford

$17.50

56.57

$891.54

(9.9%)

American Water Works 

$43.13

22.96

$1,085.09

9.6%

Procter & Gamble

$81.29

12.18

$978.42

(1.2%)

AvalonBay Communities

$133.95

7.39

$1,039.26

5%

Cash

   

$0.88

 

Dividends receivable

   

$216.83

 

Total commission

   

($100.00)

 

Original Investment

   

$10,000.00

 

Total portfolio value

   

$11,069.57

10.7%

S&P 500 performance

     

9.8%

Performance relative to S&P 500

     

0.9%

Source: Yahoo! Finance, author's calculations.

I knew the Basic Needs portfolio wouldn't be able to outrun the S&P 500 every week -- and I'm not overly concerned with its week-to-week performance, either. However, over the past week, the broad-based index gained a bit of ground on these dividend divas as a midweek swoon weighed on a number of sectors and pushed the overall portfolio 0.4% lower.

One reason this portfolio lost ground is that we have quite a few companies readying to pay dividends, so their share prices are adjusting prior to their disbursements (known as the ex-dividend date), many of which are in early June. Once we get these dividend payments in, I believe we'll see this portfolio once again handily outperforming the S&P 500.

Show me the money
This past week was almost entirely about dividends, with one company putting more money in our pocket, another announcing its quarterly stipend, and two others going ex-dividend.

The big dividend news of the week was our received dividend payment from consumer goods giant Procter & Gamble (NYSE: PG  ) , which on Thursday paid out $0.6436 per share -- a 7% increase from its previous quarterly payout of $0.605 -- to mark the 58th straight year that it has increased its dividend -- one of the longest such streaks in existence. With A.G. Lafley now firmly back in control of Procter & Gamble and the company focusing on its core brands while jettisoning noncore brands, we should begin to see tangible bottom-line benefits within the next couple of months. Given its investments in emerging markets, P&G is quite capable of mid-single-digit growth while maintaining or even growing its margins thanks to the strength of its brand name and the inelasticity of its products. In English, this dividend looks safe and may head even higher next year.

Last Monday, refuse and recycling behemoth Waste Management (NYSE: WM  ) announced that it would keep its dividend consistent with the prior quarter and pay shareholders on record as of June 6 $0.375 per share on June 20. Like P&G, Waste Management hasn't had a perfect ride, with its recycling business taking a hit on lower metal prices. But with little competition near its size, Waste Management is able to pass along price increases as needed to improve its margins.


Source: Waste Management.

The company is also quite innovative when it comes to improving its efficiency. For example, it uses gases from its landfills to create electricity to power homes. With innovation and dominance like this, I would look for the steady growth of Waste Management's dividend to continue.

Hospital and outpatient rehabilitation center operator -- and consequently the best-performing stock in this portfolio -- Select Medical (NYSE: SEM  ) went ex-dividend as of Friday with current shareholders expecting to receive a welcome $0.10 payment on May 28. Like most hospital operators, Select Medical is expected to benefit from the Affordable Care Act. As more citizens gain insurance the number of people it treats that are uninsured or underinsured should fall, giving it more collectable revenue, higher profits, and the ability to buy new equipment, make acquisitions, or perhaps even reward shareholders. Select Medical's 2.9% yield may not look too impressive anymore, but that's mainly because its share price is up 56% since August. I'd still proclaim it the most attractive company in the hospital sector.

Finally, vertically integrated oil and gas giant Chevron (NYSE: CVX  ) also went ex-dividend this past week in anticipation of paying out its freshly raised payout of $1.07 per share on June 10. This stipend marks a 7% increase over its previous quarterly payout and is consistent with Chevron's strategy of rewarding long-term shareholders. Lately, refining weakness has dragged down Chevron's share price, but the tide could quickly be changing. Higher oil prices may begin to help offset its refining weakness, while ongoing development of its overseas assets, especially off the coast of Australia, could generate the extra boost Chevron needs to push even higher. With truly exceptional cash flow I can foresee this dividend aristocrat raising its payout for years to come.

2014 Ford Fiesta, Source: Ford.

Ford motors on
Lastly, in our only nondividend story of the week, automaker Ford (NYSE: F  ) announced that its European sales for April roses 6.6% to 99,700 vehicles. According to its press release, this marks the fifth month of year-over-year market-share improvement (Ford's share jumped to 7.9%), and the 11th month in a row of overall sales improvement. The Ford Fiesta remained the driving force behind its European growth with more than 29,000 registrations, its best April in four years. The Ranger also delivered its best April figures since it debuted in Europe in 1999. Even Ford's commercial vehicle line is coming on strong with its market share of 10.2% tied for its highest levels in 16 years. As long as the company remains innovative and keeps walking the tightrope of affordable and fuel-efficient but stylish new vehicles, then I see no reason why it can't resume its uptrend.

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