If you are reading this then you almost certainly know what a dividend is. A dividend is a distribution of funds paid to shareholders (investors) based on company profits. These payments are typically made quarterly and are generally in the range of 2%-4% annual. These stocks are classified as income stocks because they provide a steady stream of to the shareholders.
Higher Yields Tends to Higher Risk
Investors like to own higher yield income stocks in their fixed-income portfolios in order to get a higher yield that what they can get from other fixed-income products such as CD’s or bonds. The higher yield from the income stocks comes at a cost as the stocks are inherently a bit more risky than the bonds or CD’s.
There is a lot to get excited about when considering what dividend stocks can do to your portfolio as many people use these payments as a significant portions of their income. You can use a dividend growth model in order to help you create a solid stream of passive income AND build a sold growth portfolio. Mike at Dividend Stocks Rock (DSR) has put together one of the best models that I have come across to achieve this goal.
The DSR model centers around 7 principles that will get to the core which stocks to buy, how long do you hold them, how to diversify them, how to these fit in with my investment goals, etc. The principle help to focus on building a rock solid portfolio.
DSR Model Principles
Principle #1: High Dividend Yield Doesn’t Equal High Returns
Principle #2: Focus on Dividend Growth
Principle #3: Find Sustainable Dividend Growth Stocks
Principle #4: The Business Model Ensure Future Growth
Principle #5: Buy When You Have Money in Hand – At The Right Valuation
Principle #6: The Rationale Used to Buy is Also Used to Sell
Principle #7: Think Core, Think Growth
They are succinct in nature but reflects a lot of value and thought consideration. Mike’s dividend growth model is clear, simple, and a home run if your looking to expand your fixed-income portfolio.