Among U.S. companies, high dividend yield companies like Cisco Systems Inc. (CSCO, Financial), Infosys Ltd. (INFY, Financial), Novo Nordisk A/S (NVO, Financial), Strum Ruger & Co. Inc. (RGR, Financial) and Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial) generated high portfolio returns during the backtesting period from January 2006 to January 2017.
Backtesting highlights criteria for good companies
GuruFocus launched the Backtesting feature within the All-In-One Guru Screener June 2016. You can generate a list of stocks that suits your investing style by selecting from over 200 financial filters using our Screener. Once you finish setting your desired criteria, you can backtest your strategy against the Standard & Poor’s 500 index ETF benchmark. The following YouTube webinar gives a deep walkthrough of the Screener and backtesting features.
Table 1 lists the backtesting results for 17 investing strategies and their performance ranks compared to the S&P 500 benchmark. All model portfolios are rebalanced every 12 months with a maximum of 20 stocks ranked by decreasing market cap.
Investing Strategy | 3 months | Year to Date | 3 years | 5 years | All time | 3yr rank | 5yr rank | All time rank |
Ben Graham's Lost Formula | -8.47% | -9.67% | -9.38% | 30.50% | 102.63% | 16 | 14 | 11 |
Dividend Growth Screener | 5.77% | 6.20% | 54.44% | 116.92% | 318.13% | 1 | 1 | 2 |
Fast Growers | 6.18% | 4.36% | 8.94% | 51.18% | 73.27% | 13 | 12 | 14 |
Good Quality Companies | 10.35% | 13.65% | 21.41% | 67.14% | 117.57% | 8 | 8 | 8 |
Good Dividend Yield Earnings Growth | 10.69% | 3.23% | -42.22% | -17.79% | -18.98% | 18 | 18 | 18 |
Mega Caps Only | 0.26% | 0.06% | -9.48% | 10.02% | -15.81% | 17 | 16 | 17 |
Peter Lynch Growth | 0.79% | 4.99% | 10.14% | 70.55% | 152.56% | 12 | 7 | 6 |
Good Margin Growth | 7.37% | 5.94% | -0.21% | 22.60% | 75.02% | 14 | 15 | 13 |
All Predictable Companies | 8.23% | 15.49% | 26.64% | 57.77% | 72.89% | 5 | 10 | 15 |
Profitable Predictable Margin Expanders | 4.88% | -1.62% | 30.87% | 51.54% | 233.88% | 3 | 11 | 4 |
Founder's Good Companies | 4.54% | 5.43% | 17.89% | 61.30% | 111.01% | 9 | 9 | 9 |
Stalwarts | 9.29% | 14.42% | 24.81% | 75.19% | 104.17% | 6 | 6 | 10 |
Walter Schloss | 5.17% | 19.38% | -4.69% | 9.53% | 23.04% | 15 | 17 | 16 |
Strong Stocks 2017 | 5.10% | 3.73% | 29.46% | 83.44% | 215.37% | 4 | 3 | 5 |
FZM Screener | 4.38% | 11.55% | 13.35% | 40.34% | 126.50% | 10 | 13 | 7 |
High Dividend Yield and ROE | -10.18% | 4.29% | 10.43% | 75.62% | 394.46% | 11 | 5 | 1 |
Five Criteria for Good Companies | 9.99% | 14.62% | 44.77% | 106.37% | 248.54% | 2 | 2 | 3 |
S&P 500 ETF | 5.12% | 9.35% | 23.69% | 80.05% | 96.31% | 7 | 4 | 12 |
Table 1: Backtesting results for various strategies compared to the S&P 500 benchmark
For the period January 2006-2017 with yearly rebalancing
Max 20 stocks ranked by decreasing market cap
Based on the following backtesting results, investing strategies that included the following criteria outperformed the benchmark:
- A five-year dividend growth rate of at least 5%.
- A trailing dividend yield of at least 3.1%.
- A dividend payout ratio less than 0.6.
- A GuruFocus business predictability rank of at least four stars.
- A Greenblatt return on capital of at least 50%.
Cisco met all of the above criteria as of July 14.
See also
GuruFocus celebrated the one-year anniversary of the Backtesting feature launch by adding two new features within the Screener: loading from a portfolio and screening using historical data. While Premium and Premium Plus members have full access to the Screener, Premium members can only access backtesting data up to January 2014. The Premium Plus membership gives access to additional features including backtesting data up to January 2006, unlimited Excel Add-in queries and the Manual of Stocks for all global regions subscribed.
Disclosure: The author has no positions in the stocks mentioned.