Dividend Growth Portfolio
Dividend stocks can be an important part of an investors portfolio. According to Hartford Funds, 78% of the total return for the S&P 500 can be attributed to the reinvested dividends and the power of compounding. $10k invested back in 1970 would yield $1.6 million by 2019, compared to just $350k if dividends and reinvestment are not included. There’s no doubt about the power dividends can have. Dividend oriented investors may also be interested in a value based portfolio as value companies tend to pay reasonable dividends.
However, just because a stock offers a high dividend, doesn’t mean we should be investing in it. Oftentimes a high dividend can mean the stocks price has been beaten down due to poor performance or other bad news. Also, high dividends put more pressure on the company and if they run into cash issues there is a chance the dividend will be cut. If the dividend gets cut, the price may continue to drop. You get the point, it can be a vicious cycle.
The Finance Frog Dividend Grower Portfolio follows a simple approach. Invest in companies that have shown continued dividend growth over the last 10, 15 and even 25+ years. This is accomplished by following 4 different dividend growth ETFs. Specifically DGRO from iShares, NOBL, REGL and SMDV from Proshares. By pulling from these various ETFs we are able to take advantage of the research of these top investment companies. (Worried about having to manage 20 stocks, take a look at our review of M1 Finance as a great way to automate your portfolio)
These ETFs also pull from various industries and market caps so we are getting some level of diversification in our dividend portfolio. For simplicity, we have invested equal amounts into each of the 4 stocks. So if for example, you are investing $2,000 towards this strategy, you would be putting $500 into each ETF.
Finance Frog Dividend Growers Portfolio
Annualized Dividend Yield: 2.02%
Annualized returns over the last 5 years: 13.40%
iShares Core Dividend Growth ETF (DGRO)
ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
S&P MidCap 400 Dividend Aristocrats ETF (REGL)
ProShares Russell 2000 Dividend Growers ETF (SMDV)
If you are interested in what some of the top hedge funds are up to take a look at our hedge fund follower page.
