1Mon·

Dividend strategy

This is my first post, so please don't hate. 🙂

I've been using the dividend strategy for a year now because it motivates me to stick with it. The simple one-ETF solution is too boring for me in the long run - I have more fun following individual stocks from time to time.

So far, I've mainly invested in dividend ETFs, and I want to keep it that way. However, I would like to add a few individual stocks to my portfolio to make it more interesting.

My goal is a maximum of 10 individual stocks so that I don't lose track. Here are the stocks I'm currently looking at:

Realty Income ($O (+1.68%) )
Main Street Capital ($MAIN (+1.03%) )
Agree Realty ($ADC (+2.01%) )
STAG Industrial ($STAG (+0.94%) )
BlackRock ($BLK (+2.52%) )
The Home Depot ($HD (+2.37%) )
Munich Re ($MUV2 (+2.03%) )
Chevron ($CVX (-0.04%) )
American Electric Power ($AEP (+1.42%) )
Waste Management ($WM (+0.6%) )
Sixt Vz. ($SIX2 (+5.56%) )

My questions for you:

👉 Are these stocks generally suitable for a dividend strategy?

👉 Is there potential for improvement in terms of sector and country allocation?

👉 Is there a stock that you think should definitely not be missing?

Looking forward to your opinions and tips!

#dividendenstrategie
#einzelaktien
#passiveseinkommen

7Positions

€9,611.23

5.71%

9 Comments

MoneyIncinerator@DoppelSchlechtMinus

1Mon

Simply create a test portfolio here, where you enter fictitious purchases of the 10 shares. This makes it much easier to recognize the potential for improvement in terms of sector and country allocation.

Whether the values fit also depends on what you mean by "dividend strategy" and what your goal is.

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DerZyklon@DerZyklon

1Mon

@DoppelSchlechtMinus At best, it should have a high payout ratio and at the same time show strong dividend growth.

Thanks for the tip, I'll give it a try

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MoneyIncinerator@DoppelSchlechtMinus

1Mon

@DerZyklon However, a high payout ratio and strong growth are simply forces that work against each other.
Of course, there are always companies that deliver both for a few years, but in the long term this is rather unrealistic.
You should therefore not necessarily expect more than inflation compensation from the high yielders in your selection in terms of dividend growth, and accordingly a lower total return compared to your ETFs.

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Christian@Investor-College

1Mon

Let me give you my opinion on your questions and describe how I invested my dividend strategy more than 10 years ago.

1. i invest with different weightings in all 11 sectors (according to GICS), i.e.
Basic Materials
Communication
Consumer Discretionary
Consumer Staples
Energy
Financial
Health Care
Industrial
Technology
REITs
Utilities

2 I hold 3 to 5 stocks per sector. This means I am well diversified overall.

3. selection of dividend stocks

I apply the following criteria when selecting stocks:
a) Payout ratio (POR) --> <75% (über drei Jahre hinweg; 1 Punkt)
b) Verschuldungsgrad --> <200% (über drei Jahre hinweg; 1 Punkt)
c) Dividendenwachstumsrate (Dividend Growth Rate DGR) -->>10% ideally over 3,5,10 years (up to 3 points)
d) Return on sales --> >5% (over 3 years; 1 point)
e) Equity ratio --> >=30% (over 3 years; 1 point)
f) Return on equity (RoE) --> >=15% (over 3 years; 1 point)
g) KCV (Price-Cashflow-Ratio; P/FCF) --> <20 (1 Punkt)
i) Free Cash Flow Marge (Free Cashflow Margin;FCM) -->between 5% and 30% (over 3 years; 1 point))
j) Annual earnings growth --> 8%-12% (over 5 years; 1 point)

This makes a maximum total of 12 points if a share fulfills all criteria.

I also add the total return (price gain + dividend). It should be >10% over 1, 3, 5 and 10 years (maximum 4 points).

This makes a maximum total of 16 achievable points.

4. researching all this by hand is tedious. Very tedious. That's why I built a screener with Google Sheet. All I have to do is enter the abbreviation of the share and the points are awarded for all the criteria mentioned, plus of course the total number of points. I use wisesheet.io as a data source in Google Sheet - they provide all the key figures including the history. An excellent extension for Google Sheet.

5. from the 20 to 30 stocks in each sector, I select the 3 to 5 with the highest scores.

6 I look at their business models and study the companies.

7. if everything fits, the selected shares are added to the portfolio.

8 I have defined my target, the total amount I want to invest. This amount is allocated according to the sector key and so I know in which sector or in which shares I am still investing or which I have bought enough of.

9 I buy from the dividend payouts (usually according to Levermann)

This gives me a clearly structured process at the start and avoids any gut feeling. Instead, I focus on long-term quality. And I feel very comfortable with that.

Now to the titles you mentioned. I ran them through the screen. Here are the results:

$O --> 8 out of 16 points (although we shouldn't rate the payout ratio for REITs; I'm sure you know the reasons)
$MAIN --> 10 out of 16 points
$ADC --> 9 out of 16 points
$STAG --> 8 out of 16 points
$BLK --> 14 out of 16 points
$HD --> 14 out of 16 points
$MUV2 --> 14 out of 16 points
$CVX --> 11 out of 16 points
$AEP --> 12 out of 16 points
$WM --> 14 out of 16 points
$SIX2 --> 12 out of 16 points

From my point of view, or according to my criteria, there are some very good stocks, some would not be for me, because there are better alternatives.
In the REITS sector, for example, I would take a look at $VICI (14 out of 16 points) or $PLD (13 out of 16 points).

Feel free to get in touch if you need help. Hope it helps with the composition of your portfolio.

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DerZyklon@DerZyklon

1Mon

@Investor-College WOW thank you so much for the information you have given me. Will certainly help me 👍

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Buddy@Dampfhammer

1Mon

I would also consider the idea of a test portfolio. For a clear dividend strategy, you can't avoid a significant US share. Nevertheless, I don't think you should ignore diversification, and I wouldn't have chosen your existing ETFs, as the country weightings and the top 10 holdings are very similar - too much duplication for me. But there are good things in there, I would concentrate on a sector for the next investment that you think should be in there next. This will automatically reduce your selection or watchlist. Before that, I would expand your positions. But that's always a question of strategy. Keep up the good work! Good luck.

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DerZyklon@DerZyklon

1Mon

@Dampfhammer Thank you very much, the three ETFs are chosen because each pays out every four months and therefore a distribution is made every month.

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Deleted User

1Mon

Comment was deleted

DerZyklon@DerZyklon

1Mon

@Nobody_123 So I've written down a few titles for now. For example, you could switch to $RWE instead of $AEP. But at the same time I want to avoid the home bias. Do you have any interesting titles?

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