The dividend yield on the S&P 500 has been declining throughout 2009, amidst one of the worst years for dividends since 1955. Back in late 2008 and early 2009, yields on major market indices exceeded 3%. Currently the dividend yield on the S&P 500 is 1.70%. However, if we remove the negative yield effect of non-dividend payers in the index, the dividend yield increases to 2.30%.
In order to be flexible in this market and not limit myself only to higher yielding stocks with disappointing dividend growth prospects, I am considering lowering my entry yield criteria to 2.50%, down from the 3% which was in effect since the end of 2008. As long as the selected companies for purchase have long histories of consistent dividend raises in addition to having good prospects for future dividend growth, my yield on cost would keep on increasing over time.
The screening criteria applied toward the S&P Dividend Aristocrat index was:
1) Current yield of at least 2.50%
2) Dividend payout ratio no higher than 60%
3) Price/Earnings Ratio of not more than 20
4) 25 years or more of consecutive dividend increases
These investment ideas are only the beginning blocks of a sustainable dividend portfolio. Investors should strive to maintain a dividend portfolio consisting of at least 30 individual securities representative of as many sectors as possible. The process of building a dividend portfolio is long, as it takes time to find enough qualified candidates for further research. As a result investors should consistently apply their screening method under all market conditions, in order to take advantage of market opportunities, and include enough of the best rising dividend stars available.
Full Disclosure: Long all stocks mentioned above except LLY and VFC
This article was included in the Carnival of Personal Finance #253 (Demotivational Version)
- Dividend Aristocrats List for 2010
- Emotionless Dividend Investing
- Yield on Cost Matters
- The Dividend Edge
Warren Buffett is the most successful investor of all time. Warren Buffett was able to keep learning about investments and business from t...
When selecting a dividend stock, investors should look at the dividend last. Income investors should first focus on profitability when inves...
One of my favorite aspects of dividend growth investing is the ability to receive more passive dividend income, simply because I made the ri...
As a dividend investor, my main goal is to attain financial independence when dividend income exceeds expenses by an adequate margin o...
There are many risks to investing . One of the major risks that could ruin a portfolio’s chances of generating adequate dividends are p...
In my investing, look for businesses I can understand that have some sort of a competitive advantage that translates into consistent earn...
Rebalancing is the process where investors sell an asset that takes an above average allocation in their portfolio, and use the proceeds to ...
There are several factors that drive future investment returns. The important drivers behind future returns on equity investments include: ...
Wal-Mart Stores Inc. (NYSE:WMT) operates retail stores in various formats worldwide. The company operates through three segments: Walmart U....
For the first three to four years of my transformation into dividend growth investing, I managed to develop a process of identifying attrac...