ISA Stocks and Shares Portfolio – Dividend Strategy
I wanted to share my investment strategy, in this case my Dividend stock strategy. You can have various strategies and often people choose between dividend and growth strategies, for clarity this one is purely a dividend accumulation strategy. I will share my 18 dividend stocks.
What is a dividend?
Basically investing in a company that pays you a dividend (cash) for your investment as you’ve placed in ownership of part of that company.
Why choose a dividend stock vs growth stock?
Dividend stocks are preferred by many investors because they can earn money from their dividends without having to worry about the company’s price fluctuating. This makes them a relatively safe investment. But, due to this safety, dividend stocks are not very volatile in terms of price and often trade at a low valuation relative to other types of stocks.
My approach
I decided to open a stocks and shares ISA (with Trading 212), which allows you to invest up to £20,000 per financial year. I used the ISA option for the tax benefits as any earnings in this are tax free.
During my research of companies I wanted to go with the best dividend stock in terms of yield or payment percentage. Also I wanted to diversify my portfolio so I wasn’t at risk to one company or industry in case something impacted them (don’t put all your eggs in one basket).
My plan was then to automatically reinvest any dividend cash back into my planned investments equally and over time the power of compounding will mean I have a bigger asset and more dividend payouts in the future. But you could just opt for the cash rather than reinvesting if you so wish.
So I decided to invest in 18 stocks, I invested equally in each when I added funds, so just over 5% in each, visually represented in this chart. Further below I have listed out all my investments, the industry they are in, the dividend yield/payout and my reasoning for investing in them.
A full breakdown of my 18 Dividend Stocks and reasons why I choose them are below:
1. Coca-Cola (KO)
Dividend Yield: 2.83%
Sector: Consumer
Industry: Beverages – Non-Alcoholic
Why I chose it: Manufacturer and marketer of non-alcoholic beverage concentrates and syrups. Has upped dividends consistently. Warren buffet has invested in it, always a good indicator.
2. Realty Income (REIT)
Dividend Yield: 4.34%
Sector: Real Estate
Industry: REIT – Retail
Why I chose it: Investing in real estate without physically paying for it. Known for a good dividend, delivers good passive income.
3. Johnson & Johnson (JNJ)
Dividend Yield: 2.57%
Sector: Healthcare
Industry: Drug Manufacturer
Why I chose it: Around for 130 years, one of the largest healthcare providers. Their products are always needed such as bandages/plasters, baby products, medicines etc
They have grown the dividend for the last 59 consecutive years. If you want exposure to the healthcare industry, this is ideal.
4. Enbridge (ENB)
Dividend Yield: 6.39%
Sector: Energy
Industry: Oil & Gas
Why I chose it: Focuses on transportation of crude oil, liquid hydrocarbons. Pays a healthy dividend of +6% and has done for 66 years. Gradually increases dividend, this has occurred for 27 consecutive years.
5. Bank of Montreal (BMO)
Dividend Yield: 4.66%
Sector: Financial Services
Industry: Banking
Why I chose it: Canadian bank stocks consistently pay dividends and have done for 100 years. BMO has personally increased its dividend 5 times on a year-over-year basis for an annual increase of 4.99%.
6. Toronto Dominion (TD)
Dividend Yield: 4.55%
Sector: Financial Services
Industry: Banking
Why I chose it: Canadian bank stocks consistently pay dividends and have done for 100 years.
7. Royal Bank of Canada (RY)
Dividend Yield: 4.29%
Sector: Financial Services
Industry: Banking
Why I chose it: Canadian bank stocks consistently pay dividends and have done for 100 years
8. Bank of Nova Scotia (BNS)
Dividend Yield: 5.75%
Sector: Financial Services
Industry: Banking
Why I chose it: Canadian bank stocks consistently pay dividends and have done for 100 years
9. General Mills (GIS)
Dividend Yield: 2.89%
Sector: Consumer
Industry: Packaged Foods
Why I chose it: Sells consumer staple products such as Cheerios, Yoplait, Betty Crocker etc. Will be fairly resistant to recession impacts as consumers will still need these products. Steady growth each year and a solid dividend.
10. GlaxoSmithKline (GSK)
Dividend Yield: 4.36%
Sector: Healthcare
Industry: Drug Manufacturer
Why I chose it: Glaxo has a diversified base and presence in different geographical areas. It has a strong pipeline of products and regular new product launches. Strong earnings growth and has paid out regular dividends.
11. IBM Corporation (IBM)
Dividend Yield: 4.75%
Sector: Technology
Industry: Information Technology Services
Why I chose it: Revenue is soaring with recent infrastructure changes, especially in the cloud computing space.Has been fairly resilient in the technology space and provides a solid dividend.
12. 3M (MMM)
Dividend Yield: 4.64%
Sector: Industrials
Industry: Conglomerates
Why I chose it: Widely regarded as a dividend king, basically a group of companies in the S&P 500 that have increased their dividend payments for at least 50 years.
13. Air Products and Chemicals (APD)
Dividend Yield: 2.88%
Sector: Basic Materials
Industry: Specialty Chemicals
Why I chose it: Has been selling industrial gases for decades and in some ways is ahead of the curve in Hydrogen investment. Dividends have been solid and consistent.
14. JP Morgan Chase (JPM)
Dividend Yield: 3.7%
Sector: Financial Services
Industry: Banking
Why I chose it: Largest bank in the US, top performing bank over the last decade. It has a strong balance sheet enabling it to weather a downturn and also invest in new technologies.
15. Mastercard (MA)
Dividend Yield: 0.6%
Sector: Financial Services
Industry: Credit Services
Why I chose it: Initially chose this as a bolster stock and help the growth. It does have a dividend but not at a high yield. I will probably switch this stock to my growth portfolio.
16. PepsiCo (PEP)
Dividend Yield: 2.69%
Sector: Consumer
Industry: Beverages – Non-Alcoholic
Why I chose it: Strong brand, dividend has ben raised for 50 consecutive years.
17. Toyota Motor Corporation (TM)
Dividend Yield: 1.64%
Sector: Consumer
Industry: Auto Manufacturers
Why I chose it: Has a modest dividend but a safe stock in the auto industry.
18. Visa (V)
Dividend Yield: 0.73%
Sector: Financial Services
Industry: Credit Services
Why I chose it: Similar to the Mastercard stock choice, I chose this stock to help the growth. It does have a dividend but not at a high yield. I will probably switch this stock to my growth portfolio.
Look out for my dividend income updates each quarter as I progress on my passive income journey!