United Parcel Service, Inc. (UPS), Walgreen Company (WAG): Is the Market Getting Frothy Again?

The real-money Inflation-Protected Income Growth portfolio just finished an astonishingly strong week, rising by more than $1,080 since the prior week’s update to close with a value of $35,806.10. For a portfolio built on fairly stodgy companies known more for their ability to pay out reliable dividends than for their ability to grow like wildfire, a 3% one-week gain like that seems almost too good to be true.

With an out-of-character leap like that one, it’s only fair to ask whether the companies in the portfolio are doing exceptionally well or whether the market’s rising tide is simply lifting all boats. If it’s the companies that are dramatically exceeding expectations, that’s one thing. But if that ascent was simply due to the market’s benevolence, then it may be a sign of a return to frothy times in which valuation seems to mean less.

When bad news is good and good news is better
Either way, not every pick in the portfolio rose last week. Package delivery giant United Parcel Service, Inc. (NYSE:UPS) actually dropped around 1.6% on the week, driven in large part from Friday’s earnings pre-announcement. By both indicating that it would miss expectations and that it was guiding down forward-looking earnings projections, United Parcel Service, Inc. (NYSE:UPS) sent its shares tumbling down almost 6% on the day.

Ordinarily, bad news and a market drop like that would be cause for concern, but this past week, it’s a welcome signal that the market is still paying at least some attention to fundamentals.

On the flip side, the best performer on the week for the IPIG portfolio was pharmacy retailer Walgreen Company (NYSE:WAG), which rose a touch better than 10% in the week. Anchoring the retailer’s surge was its announcement that it will raise its dividend an awesome 14.5%, beginning with its September payment. The stock price gain was nice, but the dividend increase is what should really help the IPIG portfolio in its effort to build an income stream that rises at least as fast as inflation.

A strong team approach
Additionally, every stock in the portfolio now shows a positive total return on a pre-U.S.-taxes basis. While Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)‘s shares finished the week slightly below the iPIG portfolio’s buy-in price, the total return is positive after adding in the dividends the company has paid. That even holds true after netting out the automatic Israeli withholding tax on dividends paid to U.S. investors.