Beginning a dividend progress portfolio could possibly be each time-consuming and sophisticated, however over the lengthy haul, it could possibly be your ticket to monetary freedom. I began investing on the age of 23, with no actual expertise or dad and mom to get recommendation from; as such, I used to be compelled to study on the run. I began following the market extra carefully each on TV and on-line. I additionally began studying completely different investing books with a view to acquire the essential data of how the market works and learn how to carry out fundamental analysis of a person firm. On this piece, I’ll cowl some factors that may allow you to get began with your individual Dividend Growth Investing Portfolio.

Getting Began

Making the choice to start placing your cash to work in shares could possibly be one of many single most essential monetary selections you make over the course of your life. The quantity you start with just isn’t essential. I started investing with solely $2K. After getting funded your brokerage account, the enjoyable begins, and you can begin establishing a method on what to put money into. I’ve had quite a few readers and mates through the years categorical their curiosity in investing, however all of them have the identical questions, “Should I invest in Stocks or ETFs, and which ones?” I personally make investments merely in shares. I benefit from the hands-on analysis and the sense of competitors they convey fairly than simply choosing an ETF, which owns tons of of shares, and forgetting about it.

ETF investing could also be your chosen route, and there may be nothing improper with that, however for me, I get pleasure from diving into the person firms. My reply to you is all of it depends upon the dangers you’re prepared to take and at what level in life you’re at. A retired investor that counts on the passive earnings every month, I might suggest ETFs and intensely secure shares with dividends and low volatility. ETFs are additionally good funding for these seeking to make investments minimal time in managing a portfolio, the place they will make investments their cash and overlook in regards to the analysis half. Somebody in faculty on into their 40s and 50s, I might say shares would add extra worth with extra danger. With increased danger comes the chance for increased rewards. The reply for you would be each, however on this piece, I’ll cowl as if we determined to go the way in which of particular person shares.

Now that now we have decided our course, it’s time to work out the forms of shares to put money into. My common reply when readers ask which inventory to put money into is mostly at all times the identical, “Invest in quality companies with a strong historical track record.” That is my reply whether or not it’s your first inventory or 100th inventory. You are likely to know what to anticipate with a lot of these firms, thus providing fewer surprises alongside the way in which. The businesses are likely to have weathered the storm throughout downturns and thrived throughout occasions of progress. These kinds of firms aren’t a “get rich quick” method, fairly a conservative method for long-term acquire. The nice Warren Buffett describes a key to investing as follows:

The important thing to investing just isn’t assessing how a lot an business goes to have an effect on society, or how a lot it should develop, however fairly figuring out the aggressive benefit of any given firm and, above all, the sturdiness of that benefit.”

One other level I might make is for traders to put money into firms they will relate to. I’ve a superb grasp on many alternative areas, however for instance, I don’t relate a lot with biotech firms; as such, my portfolio won’t be closely invested on this business. Now that doesn’t imply I’ll don’t have any biotech companies inside my portfolio, however with a view to preserve a diversified portfolio, which we’ll talk about extra about beneath, I’ll have much less publicity to the business. By choosing industries you’re acquainted with not solely makes following the corporate’s progress simpler to grasp but additionally you’re feeling extra linked as effectively.

Dividend Growth Investing (DGI) is a long-term conservative method I are likely to observe with my Huge Ticket DGI portfolio. One will need to have this method so as so that you can reap the rewards it has to supply. The facility of compounding dividend will increase is what a DGI portfolio is all about. For instance, for those who purchase a share of Coca-Cola (NYSE:KO) as we speak, you’re going to get paid a dividend yield of three.26% in comparison with over 40%, which is the annual yield for Warren Buffett, who first bought the shares in 1989.

Narrowing Down My Choices

Now you might be asking your self, “Ok, I want to invest in a quality company with a strong track record, but how do I narrow them down, as there are numerous?” Nice query! Very first thing I might do is have a look at shares which can be included within the Dividend Aristocrats listing. With a view to be included on this prestigious membership, an organization ought to:

  • Be included within the S&P 500
  • Enhance dividends 25+ consecutive years
  • Keep a minimal market cap charge of $3B

As of August 2017, the Dividend Aristocrat listing included 51 completely different firms assembly the standards talked about above. A inventory with a market cap above $Three billion and buying and selling within the S&P 500 index is the mark of a giant firm, therefore decreasing danger in a approach. An organization that’s within the S&P 500, has a market cap in extra of $3B, and has raised its dividend for 25+ consecutive years checks the packing containers for a top quality firm. So this listing is a good begin to discover your dividend anchor or perhaps so as to add one other dividend anchor to your up and working portfolio. An organization doesn’t have the power to persistently elevate dividends 12 months after 12 months with out rising earnings. Dividends at occasions could develop extra rapidly, however that’s not sustainable over the long run. The important thing to dividend investing is to really feel assured in an organization’s means to pay a dividend within the years to come back and to pay attention to unstable yields that look like sucker yields, that are excessive yields that an organization won’t be able to pay going ahead.

With a view to additional scale back the variety of inventory alternatives, one should study the artwork of worth investing. This implies investing in an organization at a top quality value and never overpaying for a inventory. This isn’t one thing discovered in a single day. I proceed to select up on new valuation metrics to today and I’ve been performing inventory analysis for a variety of years now. The perfect researcher is a steady learner. There are a number of methods to search out worth in high-quality dividend progress shares. Shares with low price-to-earnings (PE) ratios are a superb place to search for worth, however simply as a place to begin. Examine the PE ratio to that of the S&P 500, the corporate’s 5yr or 10yr historic PE common, and its rivals’ present PE ratio. Companies which have suffered from damaging one-time occasions however with fundamentals nonetheless intact could current a chance as effectively. When you get extra acquainted with different valuation metrics, reminiscent of: PEG ratio, Worth to Free Money Stream, FFO and AFFO (when evaluating REITs), and so forth., you would embrace these as effectively in your comparable metrics to search out shares at high quality costs.

Targeted Portfolio

Now that now we have narrowed down our collection of shares, it’s time to start constructing our portfolio. You is likely to be asking your self, “How many stocks should I start with?” My reply to that’s, it relies upon. It depends upon the funds you might have obtainable. It depends upon the time it’s a must to monitor your investments. Additionally, it depends upon what your objective is. If you’re like me once I began, and solely beginning with $2K, I might say two shares might be high-quality. Because of charges concerned with buying and selling, you do not need to increase such quantities of capital to 5 or extra shares and must pay the brokerage charges for every transaction. Now when you have funds obtainable, however not the time to trace your portfolio, I might chorus from investing in quite a few shares. Ideally you need a various portfolio, with investments in several industries, however on the similar time you need to preserve a targeted portfolio. The important thing to dividend progress investing is to take a position for the lengthy haul, however on the similar time, following occasions reminiscent of quarterly earnings to make sure the basics nonetheless exist. Holding a portfolio of over 100 shares would just about be unimaginable to maintain up with for my part. My objective is to maintain my portfolio within the 20-30 inventory vary.

Earlier than we dive into potential shares to construct our portfolio round, I need to take the time to briefly talk about the significance of diversification. Once I talked about above about having a 20-30 inventory portfolio, an investor should guarantee these 20-30 shares are diversified amongst numerous industries. If 75% of my portfolio was invested in Financials, I might have taken a HUGE hit throughout the latest monetary disaster in 2008/2009. For instance, beneath is a listing of the breakdown by sector for shares on the Dividend Aristocrat listing:

Supply: Simply Safe Dividends

As you may see, if this have been a portfolio, there’s a good mixture of industries, which helps decrease investor danger. What the chart above additionally portrays is that there are quite a few high-quality firms that exist in each business for an investor to select from.

Constructing Block Shares

Now what you all have been ready for, some inventory concepts to start out or add to your DGI portfolio. I prefer to refer to those shares as constructing blocks or foundational shares. All inventory investments are essential, however if you’re simply getting began, you need that first funding to be of the very best high quality, as you do not need to fail proper out of the gate, which may occur with anybody. Listed here are a few shares I might begin my DGI portfolio with together with a brief reason why. The shares aren’t listed in any explicit order.




Present Yield


Johnson & Johnson




Procter & Gamble

Shopper Merchandise




Shopper Staples











Realty Earnings



Johnson & Johnson: The corporate has paid a dividend for 50+ years and is a dividend staple that ought to have a place in each portfolio. JNJ is a mature firm within the healthcare business that continues to develop at a slower tempo, however is anticipated to launch quite a few new merchandise within the subsequent couple of years that ought to reignite progress. One may discover a JNJ product in nearly each family. The corporate is steady with a reliable dividend with the trailing twelve month (TTM) payout ratio solely being 57%. The payout ratio measures the quantity of earnings the corporate makes use of to pay the dividend. A low payout ratio like this implies the corporate has loads of room to not solely proceed paying the dividend but additionally persevering with to lift the dividend. Johnson & Johnson merchandise are present in nearly each family and have stood the take a look at of time.

Supply: JNJ Investor Relations

Procter & Gamble: PG, like JNJ, is what folks discuss with as a Dividend King, that means it has paid elevated dividends for 50+ consecutive years. This prestigious group is increased than a dividend aristocrat. The corporate is in a gradual progress mode proper now with 2017 natural gross sales rising solely 2% throughout the 12 months, with diluted EPS rising 19%. The corporate is seeking to deconsolidate the quantity of manufacturers it has to simply 65 with a view to reignite progress and refocus on the manufacturers that acquired it to the place it’s as we speak. Decreasing the quantity of manufacturers ought to assist streamline prices as effectively going ahead. The corporate is searching for 2-Three% natural progress in 2018. Trying on the payout ratio for PG, it’s sitting round 75%, which is somewhat excessive, however based mostly on the corporate’s dividend historical past and the restructuring it’s going by means of, I’ve confidence administration will proceed its spectacular dividend will increase.

Supply: PG Investor Relations

Coca-Cola: KO has paid an elevated dividend for 55 years, which places it within the prestigious Dividend King listing, together with PG and JNJ. KO is the chief within the beverage business with manufacturers reminiscent of: Coca-Cola, Powerade, Vitaminwater, Sprite, and Dasani. KO has been beneath strain as of late resulting from well being issues over the corporate’s merchandise, which it has addressed with decrease calorie and decrease sugar drinks. 12 months so far, the corporate’s inventory has elevated over 10% whereas paying a Three.Three% dividend. The TTM payout ratio at the moment sitting at 80%, that means administration doesn’t at the moment have a ton of room to develop the dividend, however I’ve confidence it should proceed to extend the dividend slowly whereas restructuring takes place. The corporate is at the moment restructuring operations away from bottling and focusing extra on syrups, which ought to improve shareholder wealth over the lengthy haul, and an investor ought to look to provoke a place on any pullback. One more reason one may put money into KO is they’d be investing alongside one of many absolute best, Warren Buffett, who holds KO as certainly one of his largest holdings.

3M: MMM is an industrial big with a diversified portfolio that may make for a stable dividend anchor in any portfolio. The corporate has elevated the dividend for 59 consecutive years. With a present dividend of three.2% and a payout ratio of solely 54%, the dividend will increase ought to proceed going ahead. As talked about, the corporate is extraordinarily diversified amongst numerous industries. It’s divided into 5 segments, which embrace: Healthcare, Security & Graphics, Industrial, Electronics & Power, and Shopper. The inventory has been on a formidable run the final two years, because it has elevated roughly 44% in worth. I really feel at present ranges the inventory seems overvalued, however with any pullback an investor ought to look to build up shares. MMM has a robust pipeline of merchandise set to be launched and demand for its digital merchandise will proceed to drive progress going ahead.

Supply: MMM Investor Relations

Verizon: VZ just isn’t an thrilling inventory play, however the gradual and regular grower with a yield over four% is usually a secure, conservative play for an investor searching for a steady dividend anchor inventory to start out their DGI portfolio. The inventory is intriguing because the dividend yield is shut to five% with a payout ratio of 59%, leaving plenty of room for administration to proceed rising the dividend going ahead. Over the past two years of buying and selling, the inventory has solely elevated four.75%. It has seen elevated competitors within the telecommunications business from not solely AT&T (NYSE:T) but additionally T-Cell (NASDAQ:TMUS). The corporate has elevated its dividend for 10+ years, and based mostly on its sturdy money stream, I don’t count on this to cease now because of the elevated competitors. As the subsequent era of cellular wi-fi rolls out, 5G, the corporate ought to proceed to be a market chief. Along with 5G coming quickly, the corporate additionally might be seeking to its Web of Issues so as to add progress going ahead. Although the inventory could also be boring, the corporate has room to proceed rising the dividend and the roll out of 5G ought to assist improve earnings going ahead together with its latest acquisitions to reinforce the Web of Issues enterprise.

Realty Earnings: Realty Earnings is likely one of the hottest publicly traded REITs available on the market. The corporate is often known as “The Monthly Dividend Company” because it doesn’t pay a quarterly dividend like most dividend paying firms; as a substitute, it pays a month-to-month dividend. The corporate is a member of the S&P 500 in addition to the S&P Excessive Yield Dividend Aristocrats index for having elevated dividends yearly for over 20 years. As of June 30, the corporate’s portfolio consists of 5,028 properties situated in 49 states and Puerto Rico leased to 250 tenants. It at the moment pays a dividend yield of four.5% with a payout ratio of 85%, which is regular for a REIT, which should pay out 90% of their taxable earnings with a view to preserve their REIT standing. The inventory at the moment trades at a premium and seems barely overvalued, however on any pullback, an investor could possibly be sensible to build up shares of O with a view to have a footprint within the Actual Property sector with one of the crucial well-managed actual property firms on the planet.


In conclusion, I hope you can find this text useful to get began investing and starting your journey to monetary freedom. When getting began, you will need to have a method, so you may decide when you have time to trace your portfolio and want to put money into shares, ETFs, or each. Then you could have an concept on the funds you’ll start with to find out the variety of firms you want to put money into to get began. Subsequent we mentioned some potential dividend anchors that we consider can be stable foundations to start out a DGI portfolio. Within the part the place I mentioned high quality shares to construct your DGI portfolio round, I attempted to offer you a diversified collection of shares to select from. As we mentioned, dividend progress investing will not be essentially the most thrilling type of investing, however with compounding progress in dividends, time is your good friend. If you’ll be able to let the cash sit, the dividends will proceed to develop over time paying you a better yield, so put money into your future as we speak.

As at all times, I sit up for listening to your feedback on the article. In the event you loved the article and don’t but observe us, please click on the “Follow” button to see future articles. Completely happy investing!

Disclosure: I/now we have no positions in any shares talked about, and no plans to provoke any positions throughout the subsequent 72 hours.

I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (apart from from In search of Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.