Perhaps I should say it was a winning year for nearly all stocks. However, I think it's more notable that our primarily dividend-focused strategy has managed to beat the market in what turned out to be such a phenomenal year for the indexes.

I mean, folks expect those boring, old, stodgy purveyors of dividends -- the forgotten art -- to be, well, boring. They're only supposed to beat the market in bad times, after all, and over periods of 10 and 20 years, no less, certainly not in a single year.

Well, as you might suspect, if you've been reading along at home this past year, that's a bunch of codswallop, and I think these selections prove it. Values exist in the world of dividend-paying companies, too, and focusing on them can yield results (no pun intended).

In truth, I don't think anyone would have guessed that a less risky, more stable portfolio of dividend payers would have outpaced the blazing indexes over this past year, yet that's exactly what happened.

The 21 companies I recommended online, 18 of which paid a dividend, whipped the market by a full 16.57% in 2003, producing a total return (including dividends, of course) of 38.05% compared to the 21.47% of their respective indexes. There were certainly a few speculative, non-dividend-paying selections in there that helped our overall returns, but I think the dividend-only Six-Pack Portfolio proves beyond a doubt that income stocks can outpace even the best of markets.

As many of my regular readers know, I also have the privilege of being the author of one of the Fool's premium products, Motley Fool Income Investor, our dividend-oriented investment newsletter. Like my readers here on, my newsletter subscribers have enjoyed market-beating success, as Income Investor selections have also punished their respective indexes.

No hype
All that said, I don't want anyone thinking I'm taking the time to pat myself on the back here, as the market has a way of keeping folks humble. This article is simply part of every Fool's practice of holding him or herself accountable for their investing successes and failures, and I would be doing it no matter what the scorecard showed.

Indeed, this is one of the most important regular practices an investor can undertake, because, as we often say here at the Fool, if you're not beating the indexes, you should consider investing in an index fund or letting the Fool do the work for you, so you can spend your hard-earned time on other endeavors.

OK, we know how we did overall, so let's get into the specifics of a few of last year's winners, and see where they are now.

The upside
As I mentioned, the Six-Pack Portfolio, which consisted of Altria (NYSE:MO), BellSouth (NYSE:BLS), ConAgra Foods (NYSE:CAG), RPM International (NYSE:RPM), Newell Rubbermaid (NYSE:NWL), and Stanley Works (NYSE:SWK), did extremely well for us. Each of these dividend payers boasted a yield of over 3% when it was recommended (two paid over 5%). While that's substantial, the growth component added just a tad bit more to overall returns, with the portfolio growing nearly 42% compared to the market's 33%.

RPM International was the best performer in the group, up over 87%, and Newell Rubbermaid (which I'll talk more about later) came in on the bottom, losing 17.3% of its value. Overall, I continue to favor all of these companies for stable growth and income.

Calpine (NYSE:CPN) was, by far, the riskiest stock that I recommended last year, but it was also one of our biggest winners, returning 95.6%. I spoke of the shares along with Duke Energy (NYSE:DUK) in my very first article for the Fool back in February of last year. Make no mistake, I wouldn't recommend a speculative company to our readers if I didn't truly believe there was outstanding opportunity there, and in the case of Calpine, without risking money of my own.

Though still a much riskier offering than I typically recommend, I continue to feel that Calpine shareholders have an opportunity for outstanding returns over the next two years. However, I don't feel as positive about Duke. At under $14 back in February, there was no question about the value in the shares, but at its current level the company is richly priced by nearly any measure. Despite its commitment to its dividend and debt reduction plans, better opportunities exist in the energy sector.

Church & Dwight (NYSE:CHD), a longtime Bill Mann favorite and the maker of Arm & Hammer baking soda, was a solid contributor, increasing nearly 26%. The company remains an excellent long-term holding.

Atmel (NASDAQ:ATML) was also in that speculative category that I dip into from time to time. This company was a pure value play on a recovering semi-conductor sector, and despite it being up 122.8% from my initial recommendation, I continue to like, and personally hold, the shares. Certainly, it's no Microsoft (NASDAQ:MSFT), which I just recommended on Dec. 8, 2003 (I also purchased it myself), but it's a strong player that's been around for almost 20 years. A caveat: This one can be extremely volatile, so make sure you have the stomach for the ride.

You won't actually find Allied Irish Banks (NYSE:AIB) in one of my online articles, as it's a bit of a special situation. I made this selection for the Fool's former investment newsletter Motley Fool Select, but Select has now morphed into Tom Gardner's Hidden Gems. Thus, this selection isn't really represented anywhere else, so I thought it best to include it here and reveal it to all Foolish readers. This is a strong banking firm with a solid dividend and I like its exposure to non-U.S. markets. The bank produced a 23.51% return for Select subscribers.

The downside
There were just two losers in the group, but that's quite enough if you bought them. Newell Rubbermaid and La-Z-Boy (NYSE:LZB) are down 17.3% and 10.88%, respectively, but I continue to like both companies. High commodity prices (namely the chemicals needed to make, you guessed it, rubber) are still squeezing Newell's bottom line. That also means the company hasn't made as much progress as I'd like to see in paying down its debt load. However, the firm is finally digesting its past acquisitions and paring debt and has a virtual recession-proof business.

The table below includes all of the recommendations I made last year and compares their performance to that of their benchmarks.

Date Rec'd Company Symbol Total Rtn.* Index Rtn.* Rtn. vs. Index


Duke Energy DUK 53.52% 34.37% 19.15%


Calpine CPN 95.60 34.37 61.23


Altria MO 50.64 36.46 14.18


RPM International RPM 87.67 36.46 51.21
3/13/03 ConAgra Foods CAG 36.02 34.86 1.17
3/13/03 BellSouth BLS 41.37 34.86 6.51
3/18/03 Allied Irish Banks AIB 23.51 29.48 -5.96
3/20/03 Stanley Works SWK 53.17 28.11 25.05
3/20/03 Newell Rubbermaid NWL -17.30 28.11 -45.42
5/7/03 Church & Dwight CHD 25.73 20.68 5.05
5/21/03 Nextel NXTL 105.94 21.49 84.45
6/11/03 La-Z-Boy LZB -10.88 12.47 -23.35
6/19/03 streetTracks REIT RWR 21.20 17.59 3.61
6/19/03 iShares Cohen & Steers ICF 22.93 17.59 5.35
7/3/03 Synovus Financial SNV 35.44 13.81 21.63
7/21/03 Atmel ATML 122.82 14.62 108.20
9/8/03 Burke & Herbert BHRB.OB 12.28 8.75 3.53
9/15/03 Bank of Granite GRAN 12.05 10.55 1.5
9/15/03 Frontier Bank FTBK 13.29 10.55 2.74
11/24/03 Van Kampen Income Trust VKI 8.67 0.97 7.69
12/8/03 Microsoft MSFT 5.41 4.92 0.50
Averages 38.05 21.48 16.57
*Includes dividends

The Foolish bottom line
Only time will tell if last year's success was a harbinger of things to come in 2004. Personally, I believe this year will be a much more challenging environment for stock pickers, as true values are more difficult to find. However, rest assured that I'll continue to do my Foolish best to find them for you and deliver them to our readers.

Fool On!

In addition to picking winning stocks, Mathew Emmert can pat his head and rub his tummy at the same time. He owns shares of Altria, Atmel, BellSouth, Calpine, Microsoft, RPM International, and Synovus Financial. He's the author of the Motley Fool Income Investor newsletter. Consider a free trial. The Fool is investors writing for investors.