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I have started a new investment account with initial funding of $60,000 added around 15th November, 2022 and expect to add more investable funds into it in 2023. My quick thoughts as to which stocks I will pick for investment are listed below.
The main objective is to generate a double digit consistent dividend income year after year and as quickly as possible. Such double digit dividend growth choices are not instantly available since most of the consistent dividend growth companies pay a dividend yield of 2.5% to 5% and in some rare cases a little more than that to start with. The way I go about is to use my investable cash in short term ‘day trades’ or ‘swing trades’ or a mixture of both and generate a trade income. A small part of the shares bought are often retained for the long term as dividend income generator. The goal is that after adjusting the gains made on the traded part, the balance of cash left invested for generating dividend income, termed by me as my net ‘cash flow investments’ or as ‘piggy pick investments’, should generate a double digit dividend income. To give an example, if I buy 100 XYZ stock at $100 which pays an annual dividend of $4 per share every year, the initial payout is $10,000. Now, after a few days of buy, I can sell 98 of those buys for a total of $9920 or 99 of those at $9960. The net cash that remains invested is my ‘cash flow cost’ for those retained shares and it will go on to earn a 10% pa dividend income in the future. If I can slowly deploy all my cash in a similar fashion, the trading activity will reduce after a while and I will enjoy a consistent double digit dividend income which will also grow year after year with dividend growth. There are instances where I own shares with zero net funds deployed. If the portfolio is populated with 40 or 50 such dividend paying and dividend growing stocks, the future dividend income collected will consistently beat market returns and take care of my future expense needs.
Given this goal as my objective, I have shortlisted a number of stocks as my target picks for this year. These are a mix of high yield slow dividend growth shares, growth shares with relatively low yield but higher dividend growth, defensive stocks generating fair yield and such combination. The past dividend growth history is also indicated. While the list is not a complete one, (I prefer mostly dividend aristocrats), it is not a must that I should buy in all these at once. The intention is to invest a maximum of 10% to 15% of total cash per ticker and in one or two shares at a time and then sell out the major quantity of the buys as early as possible. The more the number of such trades take place, the more the retained quantity as passive income generator. In that process almost a number of shares are picked as choice for a balanced retention not exceeding 2% or 3% of portfolio size. The daily or periodical price fluctuation is captured here to my advantage. If the trade gains targets are kept low, more trades can be done. I use the technical indicators such as MACD (suitable for the trade time frame) and enter or exit the trades.
| Ticker | Company Name | Sector | Dividend Growth Years |
| AMGN | Amgen Inc. | Health Care | 12 |
| BMY | Bristol-Myers Squibb | Health Care | 16 |
| JNJ | Johnson & Johnson | Health Care | 60 |
| MDT | Medtronic plc | Health Care | 45 |
| MRK | Merck & Co. | Health Care | 12 |
| PFE | Pfizer Inc. | Health Care | 13 |
| CL | Colgate-Palmolive | Consumer Staples | 59 |
| KO | Coca-Cola Company | Consumer Staples | 60 |
| MO | Altria Group Inc | Consumer Staples | 13 |
| PEP | PepsiCo Inc. | Consumer Staples | 50 |
| PG | Procter & Gamble | Consumer Staples | 66 |
| KR | Kroger Co. | Consumer Staples | 16 |
| WMT | Walmart | Consumer Staples | 49 |
| HD | Home Depot | Consumer Discretionary | 13 |
| LEG | Leggett & Platt | Consumer Discretionary | 51 |
| LOW | Lowe’s Cos. | Consumer Discretionary | 61 |
| VFC | V.F. Corp. | Consumer Discretionary | 49 |
| SWK | Stanley Black & Decker | Industrials | 55 |
| CSCO | Cisco Systems | Information Technology | 12 |
| IBM | International Business Machines | Information Technology | 27 |
| INTC | Intel Corp. | Information Technology | 8 |
| TXN | Texas Instruments | Information Technology | 19 |
| T | AT&T Inc. |
Communication Services |
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| VZ | Verizon Communications | Communication Services | 19 |
| ABR | Arbor Realty Trust Inc | Real Estate | 10 |
| MAIN | Main Street Capital Corporation | Financials | 12 |
| BEN | Franklin Resources | Financials | 42 |
| TROW | T. Rowe Price Group | Financials | 36 |
| CME | CME Group Inc. | Financials | 12 |
| USB | U.S. Bancorp | Financials | 12 |
| UTG | Reaves Utility Income Fund | Utilities | |
| AEP | American Electric Power | Utilities | 13 |
| AWK | American Water Works Company Inc | Utilities | 14 |
| BKH | Black Hills Corp | Utilities | 52 |
| D | Dominion Energy | Utilities | |
| DUK | Duke Energy | Utilities | 18 |
| ED | Consolidated Edison | Utilities | 48 |
| EIX | Edison Int’l | Utilities | 19 |
| NEE | NextEra Energy | Utilities | 28 |
| NWE | NorthWestern Corp | Utilities | 18 |
| PNW | Pinnacle West Capital | Utilities | 12 |
| SO | Southern Company | Utilities | 21 |
| WTRG | Essential Utilities Inc | Utilities | 32 |
| XEL | Xcel Energy Inc | Utilities | 19 |
Except a few such as T, D, and UTG, almost all are having a dividend growth history of over 10 years and a good number of them are dividend aristocrats having raised the dividends for over 25 years.
While timing the market is not recommended by many passive income oriented investors, I have found this method more acceptable to me based on past experience. Previously, I started a similar portfolio for my son and funded $300 K between 2015 and 2017. The portfolio is now almost fully invested with approximately 25 tickers. Now they generate approximately $3000 average dividend income every month. While the portfolio just shows a 10% gain over cost basis, I know that the total investment has more than doubled and now generates a 10%+ yield on the original cash funded. The small float cash available and the dividend income that flows in will help improve the portfolio distribution going forward and further improve the yield.
I might face some hurdles in the initial years in my new portfolio owing to current market movements. The price movements can go negative to my intentions. All the reason I will only use a max of 25% of total funds invested at any given time or a space of a few days. More caution will be exercised in further deployment if such buys becomes a baggage for some time. However it will be nice to see the portfolio grow over time with the confidence I have based on past experience.
Many of you will have a different style of such investment building process. Some could follow passive dividend income investment style with no trading, some could invest in ETF’s or mutual fund portfolios and some others in some other pattern. Have you started your portfolio? Share your experience so that new investors are inspired to get their financial freedom for their golden years. Seeking Alpha platform helps to share your experience. If you hit on my name and explore my past articles, you will get some idea as to where I have invested. I kept away from contributing more articles in the recent past owing to time demand. I hope going forward, I will share more of my experience with fellow investors. That I have started yet another new portfolio, I want to share here with what I have done. Hope I will come out with more articles with my experience and share. I have already done many trades in the last two months period and accumulated shares in the following companies as retained investments for passive income. The investments are in AMGN, D, JNJ, MDT, MO, PFE, SO, TROW, VZ and VFC within the past 2 months. I generated a monthly trade income of over $1000+ per month using the $60K invested. The net cash deployed in the passive dividend income generating part of the portfolio stands at $4200 approximately. The dividend expected from these stands at 10%+ pa of the net cash deployed. I have not provided the exact figures since it keeps changing or evolving every day with my day to day trade practices. I am retired and hence could devote a lot of my spare time indulging in trades when I am not busy otherwise.
Summary: Those of you who are interested in one of my past articles titled My Perennial Income Portfolio can view it by clicking here on this. The important points as highlights from the current article are (a) While the concepts of the portfolio building per the old article sited above remain same, the funding process is from within the portfolio and I have to resort to this at my age to generate the income for investment. (b) Another factor is that the method used in this article by using the trade gains as safety reserve will help add the stock at any price range rather than wait for the most acceptable low price range to make a buy. (c) The portfolio keeps growing every week and the dividend yield on the net cash left invested in each of the retained shares is far higher than one can imagine buying these at rock bottom prices and (d) The trade gains booked plus the dividend income makes double digit returns from the start on the funds deployed irrespective of where the market prices go.
Wish you all happy successful investing in 2023.
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