My Dividend Growth Investing Experiment

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For the past month I have been learning the rules and principles that govern dividend growth investing strategy. I am by no means proficient in their ways, but I feel I have developed a solid enough foundation to begin a little experiment. Each month I plan on allocating a percentage of my savings towards initiating positions in dividend stocks. I will not divert all my funds towards this trial run, but I see enough merit in the strategy to move forward and scale from there if the results are consistent with my expectations.

My hypothesis is that if I allocate funds using a dividend growth investing strategy, I will see consistent, long term portfolio growth while freeing up time for other pursuits and incurring less stress.

Dividend Growth Investing Rules

Every investing plan requires a set of rules that define the perimeter of the box a potential investment needs to fall within in order to be in contention for your funds. As such, I’ve developed my own set of dividend growth rules below. This is by no means an exhaustive list, but it should help guide my decisions and minimize emotion based decision making.

Rule 1: Think Long Term

Rule 2: Know the Fundamentals

Rule 3: Wide Moat

Rule 4: Strong Historical Dividend Growth

Rule 5: Price to Earnings Ratio of Less Than 20

Rule 6: Dividend Yield of 3% +/- 0.5%

Rule 7: Dividend Cover (Payout Ratio) of Less Than 50%

Rule 8: Minimum Order Size of $1,200

Rule 9: Always Reinvest Dividends

Rule 10: Don’t Lose Money

When Can I Break These Rules

Obviously not all of these, like 6, 7 and 8, are steadfast rules. I’m willing to bend them if the appropriate situation presents itself. You can expect a lengthy explanation every time I break one of these ten rules.

There is one situation I know will arise that I want to preface with a quick explanation. At some point the share price of a stock I already hold a position in will fall and present an attractive valuation for an entry point.  These substantial declines in share price are welcome opportunities to add to my position in these companies as long as they do not correspond with a substantial change in fundamentals or forward outlook.  If that situation occurs, I am willing to forgo my high level portfolio allocations and add to my positions in these stocks.

Another rule I am willing to bend is Rule 6: Dividend Yield of 3% +/- 0.5%.  The one thing to remember is that dividend yields are great… as long as they are sustainable.  I would rather invest my money in a lower yield, fundamentally sound company that has a strong track record of earnings growth than a high yield stock that has declining earnings and failed to increase its dividend for the last 12 quarters.  Going back to Rule 1, growth 20 years from now is more important than 2-4 quarters from now.

Current Dividend Portfolio

My portfolio does include a few dividend stocks that I want to include in this experiment.  They were purchased as I was researching and learning about dividend stocks. It was only after purchasing them that I decided to actually record my foray into dividend growth investing.  I have back tracked the data and will include them in my dividend portfolio moving forward. In the long run they will, hopefully, represent a small enough percentage of my portfolio that their weight will be somewhat negligible. Their inclusion should also translate into more efficient time and portfolio management if I am not required to filter them out moving forward.

Information The stocks purchased before the writing of this article that I plan to include moving forward are: PFE, KO and CVX.

Future Dividend Stock Allocation

Currently, my high level portfolio allocation is approximately:

10% – Cash/Safety Net

20% – Risk Capital

40% – Dividend Growth

30% – Mutual Funds

Again, just like my rules, these are not steadfast allocations. I do plan on evaluating where the greatest opportunities lie and shifting my allocations accordingly. But, like always, rules are an inherent aspect of optimizing any aspect of your life. Set the framework you wish to work within and adjust from there for maximum results.


To be seen….

Just kidding  🙂

I’m not entirely sure what to expect, but these are the three areas I am interested in.

Consistent Portfolio Growth

As stated in Rule 10….never lose money.

Less Research and Management Time

The other investing strategies I have implemented require careful research and, in a sense, timing.  It is my hope that dividend stocks will yield similar results with less overall management time.

Lower Levels of Stress/Mental Anguish

I don’t mind stress and in certain situations it can even be a good thing. But, additional stress is not something I wish to take on at this point in my life.  The opportunity cost of additional stress is too high when it comes to staying focused and motivated in other aspects of my life.

Ease of Implementation

I’m not looking to develop the next algorithm for predicting price movements down to a fraction of a percent.  Can I see solid returns without overly complicating the means of achieving them?

Well, there you have it. As for final thoughts, I did want to say something before I start regularly posting blogs. If you ever feel that my assumptions, logic or reasoning is incorrect, PLEASE LET ME KNOW! My entire life is built upon the collective knowledge gained by working with others to achieve similar goals. I wish, nay want, to hear from you and learn from you as I hope you are learning from me. Please leave me a comment of shoot me an email if you ever have a question or want to talk shop. I’m all ears J

Respectfully, Sam


  1. Thanks for sharing your method for selecting dividend stocks. As you indicated there is a certain ease of implementation with this type of strategy which I fully agree with. You don’t need to catch the next latest trend or other hyped stock nor figure our some new research method or screen for finding new stocks. Stick to the basics and let time do its thing.

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