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
Every dollar that you have in your possession can be traced back to you exchanging your labor for money. The labor you provided was essentia...
A common question I receive deals with the amount of money needed for retirement. This amount varies depending to personal situations. 1...
Last month, I discussed with you reasons to have your own unique investment strategy . I reached the following conclusion: If you follow ...
I invest in dividend growth stocks in order to generate a rising stream of dependable dividend income. Dividend income is more stable , and ...
I recently read the following announcement from Vanguard : " Vanguard Dividend Growth Fund (VDIGX) is closed to new investors as of J...
It is important to understand the simple math behind early retirement. Your savings rate, and asset returns will determine how long it takes...
This guest post was written by Joe Ferris, who is a long-time reader of the site. The author now manages money professionally and creates in...
The most common question or variation of a question I get concerns the amount of time to monitor my portfolio . This includes monitoring exi...
I invest in dividend growth stocks in order to generate a rising stream of dependable dividend income. Dividend income is more stable than c...
Last week, I wrote a groundbreaking article, which outlined the basic premise that interest rate levels affect P/E ratios that investors ar...