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!
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|
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!