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
I have built my portfolio of dividend growth stocks over the past 8 – 9 years, by following a disciplined approach to investing . Having an...
Each week, I go through the list of dividend increases in order to monitor performance of existing holdings, and uncover hidden dividend ge...
This is a guest post written by Ben Reynolds at Sure Dividend . Sure Dividend helps individual investors build high quality dividend gro...
This is a guest post by Mike, aka The Dividend Guy. He authors The Dividend Guy Blog since 2010 and manages portfolios at Dividend Stocks ...
Each week I review the list of dividend increases . This is helpful in monitoring existing dividend holdings, and monitoring the breadth of ...
Over the past week, we have seen some crazy turbulence in stock prices. When I saw S&P 500 futures down by 5% on Election Day, I was n...
HCP, Inc. (HCP) is a real estate investment trust that invests in properties serving the healthcare industry including sectors of healthcare...
A dividend king , is a company that has managed to boost dividends to shareholders every single year for at least 50 years in a row. There a...
Regular readers know that I have assets held in taxable and non-taxable accounts . Taxable account provide me with more flexibility in th...
CVS Health Corporation (CVS), together with its subsidiaries, provides integrated pharmacy health care services. It operates through Pharmac...