Dividend Stock Portfolio 2023 | Happy Investors

Dividend Stock Portfolio 2023 | Happy Investors

Dear Happy Investors, our 2022 Happy Dividend Stocks have achieved higher-than-average returns and dividends. In this post, we share our roadmap to selecting interesting dividend stocks. As we know, investing has risks of money loss. Our strategy for dividend stocks is to avoid loss and gain access to interesting dividend stocks.

Below we explain how, so we may all learn from it. We keep it concise. This means there are hooks and eyes. Though you can surely get the gist out of it.

dividend-stock-portfolio-examples

First, to clarify: the current results of our dividend stocks are a snapshot in time. While we have been using this strategy for some time with our Value stocks, we recently started focusing specifically on dividend stocks.

The image from above shows the performance of our Happy Dividend stocks. The average yield is 11.33%. The average dividend is 6.47%.

The S&P 500 achieved a return of about 7% in the same time frame. The dividend is about 1%.

Happy Dividend Stocks currently score better on both yield and dividend.

However, we cannot yet draw a conclusion from this. First of all, the duration is still far too short for a proper comparison. We only started this specialization as of mid-2022. In addition, the S&P 500 contains a portfolio with 500 companies. That means much more diversification from a portfolio with, say, 10, 20 or 50 dividend stocks. And also, our dividend stocks of the past three months need time to grow (or fall, time will tell).

We remain modest with a little enthusiasm regarding this specialization: a focus on dividend stocks that score high on factor analysis as well as dividend score.

best-value-stocks

Our strategy for selecting dividend stocks works as follows:

  1. We filter interesting stocks based on factor analysis
  2. From this selection we filter the stocks with the highest dividend score
  3. From this selection we make a (limited) fundamental analysis
  4. We invest a maximum percentage per dividend share
  5. For the sake of diversification, we participate in various sectors within the portfolio
  6. Ideally, we hold as long as possible, with a 6- or 12-month check based on points 1, 2, and 3.

Step 1. Analyze dividend stocks based on factor analysis

Stocks that score high on factor analysis show characteristics with a higher probability of higher than market average returns.

Large banks have their own databases to perform factor analysis. We do not have this. Therefore, we use a paid database. Based on factor analysis, we can select interesting stocks by relative financial valuation. This means how the financial valuation of company A compares with similar companies from the same sector and industry.

Factor analysis consists of:

  • Financial valuation
  • Growth rate
  • Profitability
  • Momentum
  • EPS Revisions

Step 2. Analyze dividend stocks based on dividend score

The dividend score we look at is a combined score based on dividend yield (%), dividend growth, dividend certainty (safety) and dividend consistency (history).

Stocks with a high dividend score show a higher probability of dividend payment and growth over the long term. It is not a certainty, but it increases our chances of separating the "one-dayer" with one-time high dividends from (future) dividend democrats or simply companies with strong dividend policies.

Step 3. Analyse dividend stocks based on fundamental analysis

Finally, we filter based on fundamental analysis. You can do this yourself, of course. Research a company and look at various elements, such as:

  • Company Strategy
  • Management & Vision
  • Investment policy
  • Financial policy and debt positions
  • Influences from meso- and macro-environment

What you want to find out is whether a company possesses sustainable competitive advantage. This is also called "moat." Think of large companies, such as a McDonalds. Its concept is not easy to copy. She has a sophisticated supply chain. A very strong brand. They are constantly innovating. And finally, they have a unique position, namely its real estate positions in crucial locations, cities and countries.

If we can buy McDonalds at an attractive time (factor analysis). And our research shows that it consistently achieves dividend growth. Then that might be an interesting dividend stock.

best-value-stocks

Step 4. Allocation Policy

The next step in building a dividend stock portfolio is allocation policy. We may think McDonalds is an interesting dividend stock, but we may be wrong. Or the market may change gradually. Consider macroeconomic factors, such as politics, legislation or an increasing disapproval of fast food.

To spread risk, we don't just want to diversify into sectors. We also want to assign a maximum percentage to a single dividend share. Let's be realistic. We are not global investors. The best investor buys 3, 5 or maybe 10 shares. That is for each individual to know. In any case, we opt for more diversification.

Step 5. Diversification in sectors

So in addition to allocation policy, we also want to buy different dividend stocks from several different sectors. This gives another dimension of risk diversification (in the long run). In addition, we can also think about geographic risk diversification.

Yes, of course it is better to invest largely in stocks from sectors with strong momentum. Such as commodity stocks that have risen sharply over the past year vs. growth stocks. But again, if you are not an expert in macroeconomic trends, globally, then it may be wise to be cautious here.

Step 6. Long-term holding for dividend-on-dividend

Finally, the final step for managing a dividend stock portfolio. Our preference is long-term investing. Because we select dividend stocks based on factor analysis, we can also trade more short-term. An attempt at extra high returns. Still, we prefer long-term holding for the sake of dividend-on-dividend. And because Happy Dividend stocks are selected based on dividend score, this increases our chances of "dividend certainty."

As indicated, we describe our strategy succinctly. This is not a comprehensive story. There will undoubtedly be gaps. Also plenty of room for improvement. That's fine, we are grateful for that. Investing is a game where our assets are at risk. We try to enjoy the game. Otherwise, we might as well invest entirely in ETFs, real estate funds, bond funds, and various other lower-risk assets 😉 .

About the author
Happy Investors enjoy a happy life based on financial freedom, personal development and sustainable living. We enjoy the now, and invest for the long term. We help you become financially independent. From beginning to advanced investing in stocks, ETFs, real estate and more, to personal growth for sustainable success!
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