Dividend Growth Investing Strategy: Volatility

This is the first in a series of articles that will look at how various factors influence dividend growth stocks held in a portfolio over a 10-year investment horizon. The objective is to find factors at portfolio inception that are meaningful to returns over the following decade. We want a low-turnover portfolio that delivers.
Trading vs. Long-Term Investing A dividend growth investor typically selects stocks which have increased their dividends annually for a consecutive number of years. Because there is a preference to buy and hold where possible (unless dividends are not raised annually), it is important to consider how various factors influence long-term performance of dividend growth stocks.
As an example, consider the strategy of buying stocks making extreme one-week pullbacks. If we bought and sold stocks with this strategy every week in the Russell 1000 index, our gross performance would look like this over the past 10 years.
One-Week Pullback Strategy With Weekly Trading

The first red bar is the annual performance of the Russell 1000 ETF (IWB) over the past 10 years. The next bar, which is blue, represents the annual return of the 100 stocks in the index which had the highest one-week price spike before purchase. The bar on the far right, which is green and the portfolio we are focusing on, represents the annual return of the 100 stocks which had the largest one-week pullback.
A trader may or may not be able to make this strategy profitable after... Read more