Who’s a smarter investor, Warren Buffet or me?

Admittedly, the evidence favors the Oracle from Omaha. So here’s a link to a story featuring the top dividend paying stocks in the Berkshire Hathaway portfolio.

None of these stocks are in my portfolio. If were adding names to my list today, I think Sirius would be my top choice. I have plenty of research to do before I tank the plunge on Sirius. After all, a dividend yield as high as it pays usually comes with some risk. The market likely sees headwinds ahead for the company or limited growth prospects. Ally Financial is another of Buffet’s holdings that I plan to look into.

But if Buffet liked a company well enough to buy its stock and hold it over the long haul, it’s hard to say it isn’t worth considering for income oriented investors.

Me? I still prefer picking individual stocks and building my own equity income portfolio to investing in a fund. But who am I to say? I ought to take a small stake in a dividend aristocrat or high yield dividend fund and see how their performance compares to mine.

At least I’m avoiding fees, but I can’t say I’m too impressed by the performance of my own portfolio Were it not for some tech names that I added to my portfolio coming out of the Great Recession (thank you, Microsoft) that paid fairly attractive dividends at the time. I suspect the overall performance of my portfolio would trail the market on a total return basis if it weren’t for some dividend paying stocks that turned out to be better growth prospects than I suspected at the time.

still, I take comfort when high yielding dividend funds come under scrutiny or criticism. The Wall Street Journal concludes that high yield equity funds are sometimes leaving investors behind the pack.

Falling interest rates have driven some income focused investors looking to high dividend funds to offset lower interest income on CDs and bonds. The gist of the Wall Street Journal story is that buyers of high dividend yield funds need to be cautious about unintended consequences.

“You need to guard against needless tax bills, overexposure to narrow segments of the market and the chance of deep long-term losses,” WSJ writer Jason Zweig said in the story.

Super high yielding stocks often come with super high risk prospects. And some companies offering unusually high yields are doing so to attract investors despite their shaky business prospects. The tax treatment of many of these high yield funds, leaving investors liable for “ordinary income” tax rates, is also a detriment.

High exposure to sectors such as energy and financial stocks also create potential for higher risks when these sectors come under stress.

One thing I try to do is make sure my portfolio of dividend stocks remains diversified. Even if I give up some yield on the dividend paying tech stocks in my portfolio, it expands the number sectors included in my portfolio. (And maybe adds some growth potential to what’s essentially a value oriented investment strategy, in my case.)

Well, I feel like I’ve been doing a lot of punting lately. That is, I’ve procrastinated on making major decisions or taking actions on many projects personal and professional. One of them has been keeping this investment blog up to date.

It’s been how many months since I last shared my thoughts about the market or individual stocks here? You Have Got To Be Kidding Me!

I thought I glance through my portfolio and make an impulse decision about what stock I’d most like to go long in if I were adding money today. Then I sat back and thought, ‘Most of the bad investment decisions I’ve made were made on impulse, without taking a step back and doing more research.’

And so I’ve decided to punt again, since I don’t feel like spending the day after Thanksgiving doing stock research. But what I will be doing in the remaining weeks of 2023 is reviewing and hopefully rebalancing my portfolio, probably trimming my holdings from 15 stocks to something more like 12, and thinking about what broad macroeconomic developments should guide my investing next year. More to come.

As if to remind me that viewing my brokerage account has not been a consoling experience this year, financial media have highlighted to underperformance of old faithful dividend aristocrats this year. 

Once again, I’m wishing I’d put more of my portfolio into tech growth stocks this year, even if it meant deviating off course from my long term strategy of building a portfolio that gets much of its returns from dividend payments. Or at least I wished I’d picked better tech names to hitch my wagon too. (So far, my growth picks have lagged well behind the market leaders. More on that in a future post.)

So, does my remorse mean it may finally be time to buy dividend stocks again? Several voices in the media seem to think so. 

Barron’s recently noted that ProShares S&P 500 Dividend Aristocrats (NOBL) has gained just 5% this year, including dividends — a far cry from the 18% return the market as a whole has achieved. Not good news if you invested in January. But maybe lagging performance is a sign that it could be a buying opportunity going forward. 

I’ve generally eschewed investing in ETFs and mutual funds. But I have a feeling if I measured my own portfolio’s performance against some of them, I might be surprised. But I’ve eaten enough crow for one day, so I won’t add any more to my diet right now. 

Still, NOBL and other dividend growth funds are worth a look. VIG and DGROW are among the others that I plan to consider, especially if the management fees are low. And even if I don’t buy the funds, looking at their holdings might introduce me to some stocks I should consider adding to my portfolio.