Times Top 30 Value Dividend Kings

Essentially, this strategy is to select from a list of high-quality companies, the best dividend payers that are attractively priced (value investments).

1. Get the Times on a Sunday. In the business section there is a table headed the Top 200 companies.

2. Make a list of the top 30 ranked by Market Cap.

3. From the list of 30, select the 10 companies with the highest yields. (The yield is the amount of income the share generates and is included as a separate column in the chart.)

4. Then identify from this list of 10, the 5 lowest priced shares.

5. Invest in these 5 for one year. After 1 year, do steps 1 – 4 again, and if any share is the same hold it, and replace those shares that have dropped out of your list with those that have moved into your list.

If you had done this for the 15 years from 1984 to 1998 you would have made a 20.9% per annum compound return. Now, this can work quite well when times are good, for our boom phase, or bull markets, but doesn’t work so well in bear markets. (There again, neither do FTSE ETFs/Trackers or funds). The link above about market timing gives more information about the use of this strategy and its important to understand this. (Essentially I wouldn’t want to do this during extreme market volatility until I was sure we are in a period of sustainable recovery.)

Below is the exercise done in early APR 2020:-

Steps 1 & 2 ...

Step 3 ...

Step 4 ...

This strategy gives us Royal Dutch Shell, Lloyds Banking Group, Barclays, Rio Tinto, and British American Tobacco. Straight away I can see a bit of a problem. Although this isn’t a diversification strategy, allocating 40% of my dividend shares to banking stocks in the current climate wouldn’t be advisable, to say the least. In this instance, I might have to start being creative/qualitative. I might keep Lloyds in at a meaty 11.8% and look to swap out Barclays for Rio Tinto or Imperial Brands. I then might do a bit of research to determine why Imperial’s yield is that high and if it’s sustainable. If I sense problems I might opt for Rio Tinto as a safer bet but a lower yield.

Let me know your views or experiences below in the comments. I always look forward to the mostly knowledgeable comments if find on these pages!

This is a theme I will be diving deep into in the near future with some more advanced ‘BBI friendly’ techniques. Remember, one of the main benefits is cutting out the middle man fees over time to generate higher longer-term compound returns. I will be emailing these strategies out as I go so sign up to the newsletter if you’re keen…