As a dividend stock investor, your goal is to select investments that can afford to increase distributions every single year.
The three lists I focus my attention on to find dividend stock ideas include:
Dividend champions: This list is maintained by David Fish. It includes all dividend stock companies which have managed to increase dividends for at least 25 years in a row. In addition, David’s list also includes Dividend Contenders, which are companies that have managed to increase dividends for at least ten years in a row.
The champions and contender lists are superior to the dividend aristocrats and dividend achievers lists, because they are not excluding companies based on superficial criteria such as market capitalization or average trading volume. Therefore, they provide a more complete population of potential investment ideas for the enterprising dividend investor.
International Dividend Achievers: This list includes companies which are domiciled outside of the US, which have managed to increase dividends for at least five consecutive years. It is generally helpful to be aware of international companies which have achieved a track record of consistent dividend increases, since those are not followed by many income seeking investors. However, you should also be aware of the pros and cons of investing in international dividend stocks.
I require at least 10 years of consecutive dividend increases, in order to weed out companies that simply got lucky in a positive economic trend. I do not believe in a business model that has not gone through the average of two economic cycles, which the decade is equivalent to. I want high odds that the business earnings power will be immune to shocks during the next recession, in order to ensure uninterrupted and growing distribution payments to shareholders.
You should learn as much as possible about these dividend stock companies, even if they are always overvalued. If you can track all 300 of them, you would have the knowledge necessary to act, should the right but brief opportunity arrives.
If you gain that knowledge, you would be able to specialize in a strategy you know very well, and earn good returns on your capital. Over time, this knowledge will accumulate like compound interest, and lead to better outcomes for your portfolio.
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