Don't know how to analyze dividend stocks? read this (paid content)
Don't know how to analyze dividend stocks? read this (paid content)
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My full stock portfolio
Not sure what to invest in? Need some motivation from an investor who’s spent hours researching companies and finding the best deals in the market?
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Today, we will be doing a dive into what I look for specifically when buying dividend stocks, as well as highlighting the BTSX Portfolio, a low-effort portfolio created to beat the TSX, and so far it has…
What I look for in a dividend stock
Before starting a new position, I make sure I’m looking at industries I don’t yet have in my portfolio. You don’t have to own every industry, but being too concentrated in one is never a good idea. I’ve realized personally I have little exposure to natural gas/oil companies so that is something I’m looking to add. Some people may be less exposed to the financial sector, others in healthcare. It really depends on your current portfolio and where you want to allocate your money. With that being said, once I’ve nailed down what industry I want to invest in, here’s what I look for in a dividend stock.
Dividend Growth Rate 🚀
The first thing I look for is dividend growth. Because we are dividend investors, the best stocks we can own are ones that combine share price appreciation and dividend growth. That is the ULTIMATE wealth-building combo and will make your networth touch levels you never thought were possible.
Personally, I look for stocks with an average dividend growth rate of 10% or more over the last 5 years. That averages out to about 2% per year which is the annual inflation target in my country. Of course, anything higher than that is just a bonus (if inflation is in fact 2%), but as we’ve seen lately in this inflationary environment, it’s possible that even this growth rate is too little. Adjust accordingly.
Nonetheless, this is still my benchmark and I rarely touch stocks that fall below that target. Dividend growth is my number 1 priority. Share price appreciation is great too, but as a dividend investor, I want my passive income to increase year over year without me even having to lift a finger.