Build A Quality Income Portfolio at The Portfolio Level

Lately, I see the word “quality” being thrown around on Seeking Alpha dividend income related articles. I see “quality” as having 2 facets. One, we want a quality income portfolio. Two, this portfolio consists of a group of high quality dividend payers. In the first article of this 2 article series, I’m going to explore quality at the portfolio level. At the portfolio level, we look at the bigger picture to see whether the portfolio as a whole is continuing on its track in building a growing income stream from dividends.

Building a Quality Income Portfolio

To build a quality income portfolio, an investor can consider the following:

  1. Minimum Dividend Yield
  2. Minimum Dividend Growth Rate
  3. Consistent Periodic Contributions
  4. Mix of Different Dividend Growth Rate Companies
  5. Taking Compelling Growth Opportunities
  6. Building an Emergency Fund or Buffer

1) Minimum Dividend Yield

As income investors, we care about the current yield of the portfolio. So it, as a whole, should have a minimum yield which we are happy with. I like my yield sitting at 3% or more after tax.

2) Minimum Dividend Growth Rate

As income investors, other than the current yield, we also care about the growth rate of our dividends. This is especially true for younger investors who have many years of compounding and time for the companies we hold to grow. I like my portfolio dividend growth rate to be higher than the average inflation rate of 3%. The higher the better. Realistically though, I’m aiming for an annual increase of 7% by the company increases alone. So I’m counting out the income growth effect of periodic contributions.

Please read the full article on Building a Quality Income Portfolio – Part 1: At the Portfolio Level on Seeking Alpha.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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