Building The Best Dividend Portfolio Is Easier Than You Think
Are you looking for some ideas for your dividend portfolio? If so, you have come to the right place.
Because I want to share 30 of the stocks in my dividend portfolio. And why I own them.
Enough said, let’s get moving…
30 Stock Dividend Portfolio
My best dividend stock portfolio includes these companies:
- AT&T (T)
- Automatic Data Processing (ADP)
- American Electric Power (AEP)
- Abbott Labs (ABT)
- AbbVie (ABBV)
- Apple (AAPL)
- Becton Dickinson (BDX)
- Clorox (CLX)
- Coca-Cola (KO)
- Cummins (CMI)
- Dominion Energy (D)
- Duke Energy (DUK)
- Genuine Parts (GPC)
- Hormel Foods (HRL)
- Johnson & Johnson (JNJ)
- McDonald’s (MCD)
- Medtronic (MDT)
- Microsoft (MSFT)
- NextEra Energy (NEE)
- Norfolk Southern (NSC)
- Paychex (PAYX)
- PepsiCo (PEP)
- Philip Morris (PM)
- Procter and Gamble (PG)
- Realty Income (O)
- Southern Company (SO)
- Target (TGT)
- Verizon (VZ)
- Walmart (WMT)
- Wisconsin Energy (WEC)
Maybe you own some of these stocks too? Or, maybe not. I don’t know.
Whatever the case, whether you are just getting started in dividend investing. Or, you are an experienced pro.
Here are some of my thoughts on building a stock portfolio for passive income from dividends. With these companies or others…
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
Why Are There 30 Stocks In Todays Dividend Portfolio?
First, why 30 stocks? And I say, good question, thanks for asking!
Specifically, academic research suggests that 20-30 stocks are a good number of stocks to own. To achieve an acceptable level of diversification.
Forgetting about academics for a moment. Common sense tells me it’s hard to follow more than 30 stocks in a dividend portfolio. Unless you are a full-time investor.
And what about holding less than 20 stocks? Well, that number may not provide enough diversification. For protecting your portfolio from a blowup in any one stock.
The Best Dividend Stock Portfolio Also Requires Diversification Among Industries
Additionally, this number of stocks allows for spreading one’s investments across a variety of stock market sectors and industries.
- Business services
- Food and beverage
- Health care
- Real estate investment trusts
So, 30 is today’s number of dividend stock ideas. They cover a range of different industries and businesses.
Next, why these stocks? Another good question…
Features Of Every Stock In This Dividend Portfolio
Because there are several traits that each of these stocks has in common. Let’s discuss…
Every Stock Is Part Of My Dividend Portfolio
First, for full disclosure, I own and hold each of these companies as part of my investment portfolio. Some I’ve owned for nearly 30 years!
But, does that mean you should own the stock too?
Well, not necessarily. Since that decision is entirely up to you. After all, it’s your money, not mine!
However, there are a few characteristics that make these stocks a good fit for me and my approach to dividend investments.
So what? You might be saying.
And my response…
Every good dividend investor has a strategy by which they pick their stocks.
Here’s mine. You should have one too, even if it’s a little or a lot different.
Good Dividend Yield
For me, each of these stocks has a good dividend yield. What do I mean by that?
Well, the dividend yield is high enough to provide a meaningful level of dividend income right now.
For me, that usually means at least 2%. But not much more than 5%-6%.
Because higher dividend yields oftentimes indicate investment risk beyond my tolerance for it.
Logically speaking, current income is one of the big reasons, I invest in dividend stocks. However, I do not chase high dividend yields in pursuit of that income.
Nor do I care about the exact timing of dividend payments. For example, monthly dividend stocks are nice. But not necessary for my purposes.
However, a current income is not enough…
Consistent Dividend Growth
Since I require each business I own to provide annual dividend increases. Thus, each of the companies in today’s dividend stock portfolio has a track record of increasing their dividend on an annual basis.
Many are Dividend Aristocrats and Dividend Kings. The exact type of classic dividend growth stocks I like to invest in.
My experience tells me that dividend income today. Plus, dividend growth in future years. Over time, this equals higher share prices for long-term dividend investors.
Income today, higher income in the future, and a rising stock price over the long run mean one thing. Solid and stable total investment returns.
Exactly what dividend investors are after. But don’t forget about another key ingredient, dividend safety…
Appropriate Dividend Payout Ratio
Because a growing dividend is typically a safer dividend. Meaning safe from a possible reduction in the future.
However, there is another measure of dividend safety, that I am always on the watch for. Specifically, an appropriate dividend payout ratio.
What Is The Dividend Payout Ratio?
Well, simply put, it is the amount of a company’s available financial resources, typically measured in cash flow or earnings. That is paid out to investors in the form of dividends.
Generally, speaking a lower dividend payout ratio means a safer dividend.
Because it gives the company a better chance to sustain and even raise their dividend during difficult economic times. Thus, reducing the risk of a dividend reduction.
What Is A Good Dividend Payout Ratio?
Therefore, a lower dividend payout ratio typically means a safer dividend. However, not all dividend payout ratios are created equally.
So, what makes a dividend payout ratio appropriate?
Well, a company with abundant cash flow, operating in a stable industry can afford to have a higher dividend payout ratio. Paying as much as 70 or 80% of their financial resources to investors in the form of dividends.
While a business that is more exposed to the ups and downs of the economic cycles is better served with a lower dividend payout ratio. Perhaps 40-50%.
Okay, there you have it. 30 good dividend stocks and why I hold them in my dividend portfolio.
Allow me to recap with a few parting thoughts…
Wrap-Up: Building The Best Dividend Portfolio is Easier Than You Think
Holding 30 companies in a dividend stock portfolio is a good number for diversification purposes. Of course, you can hold more or less to serve your more specific dividend investing strategy.
However, from my perspective, 30 is a solid benchmark to consider!
Whether you are building a dividend portfolio for retirement income. Or, have other goals for the money.
Then, as you construct a stable dividend portfolio for regular cash flow. Be sure to set clear criteria for each stock you choose to buy and hold.
My criteria include…
1) A good dividend yield. Usually between 2% and 5%. To provide enough income today without taking on too much risk from higher dividend yields.
2) Consistent dividend growth. Specifically, owning companies that increase their dividends every year.
3) Appropriate dividend payout ratio. A level set and managed by the company responsibly. As it relates to the stability of the business and the industry in which it operates.
Furthermore, for becoming a better dividend investor, learn all you can. For this, I like…
The Financial Freedom Investing Course
It’s perfect for discovering more about how to build a passive income stream from dividends. While fine-tuning an approach that will work best for your situation.
Okay. That’s all for today.
Now, go forth and build your dividend portfolio with solid dividend stocks. Using sound criteria to select them.
More Reading About Dividend Investing
If you enjoyed today’s article, you may enjoy…
10 mistakes I made as a dividend investing beginner
Know your dividend investing tipping point
All for now. Thanks for reading, and good luck with your dividend stocks.
Author Bio, Disclosure, & Disclaimer: Please join me (Tom) as I try to achieve my goals, find my next place to live, and make the most of my money. However, I am not a licensed investment adviser, financial counselor, real estate agent, or tax professional. Instead, I’m a 50-something-year-old, early retired CPA, finance professional, and business school teacher with 40+ years of DIY dividend investing experience. I’m here only to share my thoughts about essential topics for success. As a result, nothing published on this site should be considered individual investment, financial, tax, or real estate advice. This site’s only purpose is general information & entertainment. Thus, neither I nor Dividends Diversify can be held liable for losses suffered by any party because of the information published on this website. Finally, all written content is the property of Dividends Diversify LLC. Unauthorized publication elsewhere is strictly prohibited.