Readers of my premium newsletter received a detailed analysis of these selections on Sunday, August 25th. They are receiving a trade confirmation by close of business today.
I go beyond just the companies I invest in every month, and analyzing these companies in detail of course. I try to instill discipline around creating and following a process for reaching a set of goals within a time-frame. The goal of the portfolio is to generate $1,000 in monthly dividend income, by investing roughly $1,000 per month in ten attractively valued dividend growth stocks. I made a slight modification this month to buy a little more than 10 companies, in order to round up portfolio weights.
I also try to instill discipline around diversification, regular investing through dollar cost averaging and sticking to a process through thick or thin. Everything I share is based on lessons that I have accumulated over the past decade.
In this real money experiment, I will walk you through the complete process of building and managing a portfolio. In real time. I am allocating money first in the best ideas I find today. This is the exercise that depends on my experience selecting winning dividend investments for over a decade. Investing is part art, part science.
In general, I look for the following characteristics in the companies I am considering for analysis:
- A ten year streak of annual dividend increases
- A sustainable dividend payout ratio
- An annual dividend growth rate exceeding inflation over the past decade
- A pattern of earnings per share growth
- A P/E ratio below 20
This process relies on manually screening the list of dividend growth stocks I find interesting. Plus, it also involves some thinking in terms of trade-offs and probabilities. What this means to me is that based on my reviews that I have made monthly, I have noticed that certain companies can be found quite often at attractive valuations. Therefore, with this screening process, I will try to focus my attention on those harder to get companies too. In terms of trade-offs, I also think in terms of the trade-off between dividend yield and dividend growth. If a company yields less, I would be expecting faster dividend growth. On the other hand, a company with a high yield will likely be unable to grow distributions at a high rate every year. My goal is to try and select companies that I will be happy owning for years.
I am not going to churn the portfolio. I am a passive buy and hold investor who has learned that selling is often a mistake. If the companies I own cut dividends however, I will likely sell them and reinvest the proceeds elsewhere. If we get acquisitions in cash, I will likely reinvest it alongside the list of 10 top dividend stocks. If we get acquisitions in stock, I will evaluate the situation and decide what to do. The next step involved reviewing the list to come up with companies to invest in.
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This information includes a monthly list of dividend growth stocks I am buying, as well as timely notification of any ad-hoc purchases I will be making. It also includes a review of my dividend portfolio holdings, and evaluation of how I am doing relative to the goals set out at the inception of the portfolio. You will also obtain educational comments on an as-needed basis.
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