As the title of this article states, I'm going to be making some considerable changes around my portfolio. I'll achieve this by refocusing my allocations to specifically target high percentage dividend growth stocks. It is easy for an investor to get caught up in the moment and chase after stocks that are sporting a nice yield but don't offer that great of a dividend growth percentage (I'm looking at you AT&T).
Don't get me wrong, T is a solid long term dividend aristocrat that has it's place in every investors portfolio but the company only has a 5 year dividend growth percentage of 2.2%. That isn't even enough to keep up with inflation. It's important that I realize this lesson early on into my dividend investing career and refocus my portfolio into companies that offer up a better growth percentage and to really focus on building up said positions.
Weeding Out The Lowest Growth
I've gone over my entire portfolio and I've identified a few companies that are severely lacking in the dividend growth percentage category. The two major ones that stick out to me that are neck and neck with the annual inflation rate are WMT and T. A few other companies barely treading above this are also ED and EMR. The difference on the last two however is that they have announced higher increases in the past as opposed to T and WMT.
After doing some deep analysis of current yields and dividend growth rates I've noticed a common trend with most dividend stock in the double digit raise category. Most of these companies are only yielding in the 2.2-2.8% range. The key here is that these companies are continuing to grow their overall share price which contributes to having a better valuation and while still bolstering their dividend yields by double digit growth percentages.
After doing a lot of researching I noticed that most of the companies with the highest yields were currently trading significantly under their 52 week highs which is forcing my hand to want to sell my lowest yielding growth stocks and re-balance into higher growth oriented companies such as ADM, MMM, FRT, AFL, CTAS and KMB. I also have a few non aristocrats that I want to bolster my positions in due to the nice growths they are offering such as O, D and WPC.
Exchanging Out My Lowest Growth Stocks
I have already begun re-balancing process and I sold half of WMT position and I sold off twenty five percent of my T holding. I'm also going to be eliminating my newest position in JPM as doing more research into holding them as a long term DGI stock made me rethink a few of my initial reasons why I wanted to purchase in to them and I realized I can achieve the same goal else where that is offering more dividend safety due to DGR history.
I don't think I'm going to be selling anymore of either positions but we will see. I've really been feeling it in myself to swap the rest of my WMT shares for MMM. This would allow me to be in a company that offers a solid double digit 5 year dividend growth rate while also being in a relatively low risk investment. The diversification side of me is telling me other wise and I think I may hold on the the remaining 23 shares I own.
Going forward, I'm going to be a little more conscious of the dividend growth rate which seems like a given to most but it was something I didn't really pay to much attention to when I first started investing. I would really like to keep my DGR at around a 5% for my portfolio so I'll be focusing more towards companies that offer such DGR's that are near 52 week lows.
Their are plenty of awesome companies at this exact spot and I plan to take advantage of them
With all that being said, I added 9 shares of MMM, 20 shares of O, 13 shares of D and 30 shares of ENB. With all this said and done, my new annual dividend income is now at $3,193.27 annually!
I also have more plans to add the rest of this week based upon how the markets perform due to the current world situation. I would like to add towards my FTR, ENB and my KMB position since both are near 52 week lows and offering awesome 5 year DGR.
I'm very happy with the current portfolio re-balance direction I'm taking and I'm looking forward to adding to my current holdings and boosting up my dividend growth power. I have a lot of great names in my portfolio and I think the time has come to really start throwing a lot of capital into the holdings that are solid dividend earners near 52 week lows. Now I just need to figure out
now the get all the extra capital to fuel my purchases!