Managing Your Dividend Stock List

How do you manage your dividend stock list once you've started building your portfolio you ask? You’ve come to the right place!

The first thing to realize is that you’re investing for the long term. Success requires a patient mindset to allow time and compounding through dividend growth and reinvestment to work its magic. It takes years but the growth will be exponential. The larger the portfolio becomes, the faster the growth will be. Once your compounding machine has reached a certain size (approximately $100,000), it will really begin to take off...

Next, develop rock solid confidence in your list of dividend paying stocks based on your own research. Don’t be influenced by anything but your own research. Avoid listening to the market noise, like financial news, because it will only tempt you to make decisions based on emotion. Emotional decisions will not lead to good results!

Your stocks will bounce up and down in market value daily but over the long term, both share price and dividends will increase with earnings. Remember, you are investing in businesses. The stock market is just a means of buying into these companies. Don’t be distracted by the noise!

Now let’s get into managing the performance of your holdings...

The name of the game is to build a compounding machine that will create wealth for you and your family. Therefore, each company in your portfolio has to do its part.

It’s a good idea to read through earnings reports every quarter to make sure that your stocks still meet the selection criteria that they did when you first purchased them. Click here for our criteria for selecting dividend paying stocks. Is revenue and earnings growing enough to support the dividend increases that you need to keep your compounding machine on track?

A temporary fluctuation in earnings is not something to worry about. But a steady decline in earnings and increase in payout ratio is a red flag! As a dividend investor, you need to make sure that the dividend is safe. A healthy dividend requires increasing earnings and a low payout ratio. So keep a close eye on these figures.

Finally, did the dividend increase? This is what you are really concerned about! Each company in your dividend stock list should increase their dividend every year. If one of your companies does not increase their dividend in any particular year, they had better have a darn good reason for not doing so!

Good reasons to sell off one of your holdings would be:

  1. The company no longer meets your selection criteria.
  2. The company is not performing to your expectations or is continually underperforming your other holdings.
  3. The dividend did not increase from year to year (unless there is a good reason).
  4. The dividend is cut. You can generally predict this long before it actually happens by keeping an eye on the dividend payout ratio. If the payout ratio keeps rising, be worried.

If none of the above occurs, just hold them and keep reinvesting the dividends!

There you have it my fellow dividend investor... The recipe for success is to avoid the news, maintain a long term view and make sure that each company in your dividend stock list is holding its weight as part of the machine...

...and keep reinvesting your way to wealth!

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