Polliesdividend

Creating my own Dividend Factory

Just like any DGI, I try to increase my monthly budget through dividend investing. At this moment I reinvest all dividends I receive. My goal is to build enough passive income from my Vrijheid Fonds to retire early. I consider my Vrijheid Fonds as a kind of Dividend Factory.

We all know that dividend is a portion of the profits distributed by a company to its shareholders. And I try to invest only in company or mutual funds that pay a reliable dividend. Furthermore I would also like that the dividend grows a little each year. This to cope with inflation and thus have the same purchasing power now and in the future. Companies that have a good dividend track record, have a strong cash flow, have little debt and have a dominant market position are often able to provide a reliable and growing dividend for the future. These are the companies a DGI looks for.

Besides the very important fact that a company pays an increasing dividend each year, the frequency with which companies pay dividends is also important if you want to live of your passive income. Most Dutch (and European) companies pay annually or semi-annually dividend. In America the standard is a quarterly dividend. There are also companies that pay monthly dividends.

The period when a company pays dividend varies also from company to company. Unilever for instance, pays four times a year in March, June, September and December. Apple on the other hand pays in February, May, August and November its. Add General Electric to the mix, with dividend payments in January, April, July and October, and you have a combination that pays dividend each month. Your own Dividend Factory!


dividend

Dividend Factory

So there you have it, you can create a portfolio that delivers reasonably consistent monthly income by owning high quality dividend stocks with quarterly payment schedules. This by owning companies with complementary payout schedules and good dividend yields.

While the monthly income generated will still have some lumps due to the different dividend yields and dividend growth rates of these companies, it should be much smoother than buying dividend stocks randomly.

Okay that is all theory. Now let’s take a look at my Vrijheid Fonds. I receive payments every month. And especially every third month (the end of every quarter) my payments are the biggest. The months of January, April, July and October definitely lag behind. For a complete overview take a look at my dividend income page.

So I have some data mining to do and look for high quality dividend stocks that pay in January, April, July and October. To do this I used the famous CCC-list of David Fish and only looked at the Dividend Champions (25 or more Straight Years Higher Dividends). And with the help of my Pollie-code I filtered out 4 companies. And yes, if I use the Pollie-code very strict, there was only 1 company left. But I adjusted the Pollie-code a little and looked at yields higher than 2% in combination with a DGR (5 yr.) of approx. 10% or higher.

Yield DGR 5yr Payout ratio P/E ratio ROE EPS growth Industry Sector
ADP 2,31 10,50 66,88 28,98 34,10 3,17 Business Services Information Tech
ITW 2,11 9,60 42,23 19,99 36,70 5,21 Machinery Industrials
WMT 2,74 10,60 44,25 16,15 18,40 4,52 Retail-Discount Consumer Staples
BEN 2,16 15,40 26,09 12,09 14,00 2,76 Financial Services Financials

Conclusion

Well these are the companies to look into the next few weeks. And in the light of diversification I will leave WMT alone (for now). Through research and investing in the right companies I’m creating my very own Dividend Factory!

Do you look at the payment schedules of your portfolio? And beside the four mentioned companies do you have other suggestions? I like to hear from you.

Thank you for stopping by!

Cheers,
Pollie

Please follow and like us:
0

7 thoughts on “Creating my own Dividend Factory

  1. Pursuit 2 Freedom

    Walmart is a great company. I bought it on the dip a while back and it’s up 25% already since I bought it. But you have to take into account that the dividend won’t grow much for the next 1 or 2 years because of the raise of minimum wages and the money Walmart is pouring into online sales.

    I believe this will result in higher earnings on the long run. That’s why I bought it, but the 10% DGR in the table won’t be representative for the coming period.

    I don’t really know the other 3 companies. I’m curious about your opinion on those 3!

  2. Pululante

    “Do you look at the payment schedules of your portfolio?”

    Absolutely no. If I’m able to manage my monthly expenses (like all/many of the DGI) I’m also able to manage the income of dividends even if they are not regularly received throughout the year.

  3. Dividend Diplomats

    Pollie,

    Nice article. I do like BEN as well at these levels. It is SO hard to find attractive companies on an individual level right now, though, cannot lie about that. But those that you’ve listed above have great balance sheets and have paid a reliable dividend for QUITE some time now. Good luck and keep us posted with what you do, doing great over there!

    -Lanny

  4. Graham @ Reverse the crush

    Nice post Pollie,
    I love the concept of building a dividend factory.
    I don’t own any of the other stocks on your list here, but I previously owned Walmart.
    It’s still a solid dividend payer, but the rate of dividend growth has drastically slowed down. They also seen to be losing their moat. Their advantage has always been pricing power, but with wage increases and retail locations to maintain, I’m not sure how they compete against Amazon. Their online growth was what I liked before, but even that seems to be slowing down. They also dropped their small store format for growth. It’s hard to predict what will happen with WMT from here. However, it’s still a good long term piece for a diversified portfolio. Hopefully they clear up some of the headwinds. Thanks for sharing!

    1. admin Post author

      I have the same doubt with WMT. But within two years we will see how they are doing. I think the will surprise us. Or do i hope so ? 😬

      Cheers,

      Pollie

  5. Dividends Down Under

    I love your thought process Pollie – I love that DGI is like an unstoppable snowball and hopefully just keeps giving us more and more income. I’m not familiar with any of the 4 you mention except Walmart – and with Walmart I have similar concerns as Graham to their moat being eroded. They don’t seem to be appealing to the younger generation’s type of shopping either.

    Looking forward to seeing what you pick.

    I do look at the payment schedules and I’d like us to have payments in every month of the year eventually, but because we’re such new investors then it hasn’t happened yet.

    Tristan

Leave a Reply

Your email address will not be published. Required fields are marked *