Geraldine Weiss—the grande dame of dividends—died on Monday, April 25. She was 96.
Though my colleagues here at AAII have written and spoken about her strategy many times over the years, I'll admit to not being aware of what a trailblazer Weiss was. As Mark Hulbert explained on MarketWatch several years ago, Weiss first penned her newsletter Investment Quality Trends under the name of G. Weiss in 1966. Most subscribers had no idea that the “G” stood for Geraldine as opposed to, say, Gerald, George or Greg until Weiss made an appearance on “Wall Street Week with Louis Rukeyser” in 1977.
Unlike the financial industry at the time, the market was—and continues to be—agnostic about gender. Weiss proved this with her strategy. Our Weiss Blue Chip Dividend Yield screen has the 10th lowest risk index out of the 60 stock screens available to AAII members, yet it has beaten the S&P 500 index since its inception in 1988 (9.4% versus 6.3% annualized). The margin of outperformance would be even larger if we factored dividend payments into the performance calculations of our stock screens. (The screen is based on her 1988 book “Dividends Don't Lie.”)
Weiss' approach also influenced our thinking when we launched our Dividend Investing newsletter in 2012. Her use of yield as a valuation indicator and requirements for both dividend growth and strong underlying fundamental quality continue to underlie the DI approach.
A key to understanding Weiss' strategy is recognizing a stock's price as being driven by its dividend yield. Weiss believed that value investors are drawn to stocks with high yields. As investors begin purchasing shares, the dividend yield's denominator (price) increases, pushing the ratio lower. Once the price appreciation causes the yield to decline, investors begin to sell the stock because it is no longer an attractive investment on a dividend-yield basis. The downward pressure on the share price from investors exiting the stock pushes the dividend yield higher once more, making it an attractive purchase for value investors seeking yield. Value investors become enticed by the opportunity to realize a higher stream of cash payments relative to the price paid.
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In her latest My Investing Discoveries blog post, AAII assistant editor Anine Sus shares her takeaways from Daniel Crosby’s “The Behavioral Investor.”
The next episode of the Individual Investor Show will be available on YouTube and popular podcast platforms, including Audible.com, next Thursday afternoon. We’ll explain how to incorporate environmental, social and governance (ESG) strategies into your portfolio.
The final step of the PRISM Wealth-Building Process is effectively monitoring your portfolio. It is designed to help you view your portfolio within the context of your goals, desired allocation and current stage of life. Complete Lesson 1 today.
AAII Sentiment Survey
Pessimism is at its highest level since March 2009. This week’s bearish sentiment reading also ranks among the 10 highest in the survey’s history. Plus, this week’s special question asked AAII members to share their thoughts on the ongoing volatility in the Nasdaq composite this year. More about this week’s results.
This week’s results:
Bullish: 16.4%, down 2.4 points Neutral: 24.2%, down 13.1 points Bearish: 59.4%, up 15.5 points
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