I started with a dividend portfolio. I manage my mom's investments and its still dividend heavy due to her age and where she is in the life cycle.
Things to understand...
Read up on the terms value and growth if they are unfamiliar to you.
Learn about the differences between value investing and growth investing so you can make more informed investment decisions.
Quoting one of my previous posts on the subject..
This goes back to the type and age of a stock. Generally, stocks are considered "growth" and "value". Growth stocks tend to be those that are "growing" their revenue streams year after year. They tend to be putting every dollar made back into the company to grow that revenue. Then there are older, more established companies. Value companies. Many of them are dominant in their sectors. They have little growth left in them but make enormous amounts of money due to their dominant position. Instead of using those earnings to grow revenue that isnt their, they return some of those profits back to the owners (shareholders) in the form of dividends.
Value investing has been back-seated for a long time because of the geriatric bull market. Some investors have never experienced investing in a multi-year bear market. Imagine an entire year when the S&P 500 is negative for the year. Owning shares in stocks that pay 3, 4 even 5% dividend yields means you are making money in those years.
Also - Older, fixed income investors like high dividend stocks so they can live off those dividends without having to liquidate principal holdings. Lets say you retired with 1 million in stocks that average a 5% dividend yield. That is 50k a year in dividends added to social security. If your house and car are paid off, that may give you a comfortable lifestyle without selling any stock.
Finally - You may take a position on a down stock you like knowing it will take time to recover or in an industry that will be slow to recover. Getting paid 1 or 2% while you wait for it to move back up is a bonus. I always put everything in terms of the annualized return of the SP500. 9.75% This includes the dividend reinvestment. The S&P pays about a 1.5 - 2% dividend over all. So having a safe play stock that pays 3-5% is a nice hedge.
Some people ignore dividends and value stocks in favor of growth. Its an investing philosophy.
Dividend stocks definitely have a place in any portfolio. Many investors have never seen a multi-year long bear market. A 4% dividend yield when the S&P 500 is -10% for the year is pretty amazing.
Dividend Stocks I like/Own/Have Owned:
ABBV - 4.87%
KO - 3.29%
PG - 2.45%
KMB - 3.45%
T - 7.23%
LMT - 3.08%
GD - 2.76%
HDV (ETF) - 3.96%
PM - 5.58%
MCD - 2.44%
CVS - 2.74%
IBM - 5.35%
ED - 4.35%
PFF (ETF) - 4.80%
Note these dividend yields are as of today's close. The market is at near highs so some of these yields aren't at a spot where I might buy them today. Some of the factors to consider with dividend stocks is their free cash flow and their free cash flow to dividend payout ratio. This tells you if the payout will be sustainable over the long haul.
I would not hesitate to buy ABBV today. I have owned it since the $60's. I own as much as my portfolio will allow.
T is a dividend beast. It has shitty upper level management and a fuckton of debt. But it makes a bzallion dollars in free cash flow and can sustain the dividend while paying down the debt. Zero interest rate environment is helping them re-issue their debt to lower interest rates which is saving them a ton of money.
LMT is a dividend payer with potential to have some stock price appreciation. I own it.
HDV and PFF are ETFs focused on Dividend payments. The only downside to PFF is the net fee is like 0.39%. So it effective pays about 4.5% a year. HDV is only about 0.08% fee.
IBM is dying a very slow death due to pisspoor managment. It makes a ton of free cash but its shrinking revenue. Perhaps one day someone turns it araound. Its probably a safe bet for the next 5-10 years at least with a beast dividend thats safe.
PM - If smoking isnt anathema to you, PM is a solid stock with a high end dividend.
PG and KMB are long haul investments. I own them. Not the best dividend, but they still grow revenue so there is some stock appreciation to be had.
MCD, CVS, GD are good and solid, their stock price has run up so their dividend yield is lower than most would find attractive.
ED is an electric utility. Protected as a state utility, its a nice safe dividend payer.