Here are the the rules of the dividend experiment. Every time I add a new company to my portfolio I will check off the criteria on this list.
Hopefully this will give you a clear insight into the thought process!
Here are the rules:
1. Buy one new stock every month
2.Use a tax-sheltered ISA
3. A minimum yield of 3.4% in the UK and 4%in the US
4. Buy at the bottom half of the stock’s 52 week range
5.The P/E ratio should be under 18 and lower than most of its peers
6. The payout ratio should be under 75%
7.Strong company potential and a good history of paying dividends
8. The current ratio should be in line with its peers
9. Diversify across industries
10. Review the portfolio every six months
These dividend experiment investing rules will help guide me and make it easier to pick suitable stocks for the channel’s purpose.
Remember for the dividend experiment we want companies that have the following 3 things:
1. A sizable yield that can eventually help pay the daily expenses
2. Good value. We don’t want to be buying any stocks at all time highs, we want beaten down stocks that are unfairly overlooked by other investors.
3.Stability and security. Being overlooked by others often means that the stock carries some inherent risks. when picking stocks we want to balance the risk with the potential dividend payoff. There is no point buy a huge yielding stock if it will scrap the dividend straight after you buy it!
If you have any questions or advice I would love to hear them in the comments below!
The 10 Dividend Experiment Investing Commandments (my rules for buying stocks)