Merry Christmas! How’s Your Dividend Portfolio Doing? Year End Review

We would love to wish everyone a Merry Christmas, Happy Holidays, and a Happy New Year! Many years ago, between 6 and 4 BC, Christ was born. Christmas is a special day to celebrate the birth of Christ. For many people, it’s a heartwarming festivity to gather with friends and family to enjoy a great feast and exchange greetings and presents.

“As the well-known story in the Gospel of Matthew goes, three … wise men, followed the Star of Bethlehem to Jerusalem some 2,000 years ago. And after consulting with King Herod of Judea, the men found newborn baby Jesus in the little town of Bethlehem.” (Source) Below is an illustration of this story.

Over here, we’re having a white Christmas. Nothing like a good exercise of shoveling snow in the morning!

It’s a rewarding exercise to tally up the dividends you receive in your dividend portfolio for the full year. You can wait until the new year rolls around in January to make sure you let any late December dividends roll in. The ability to download dividends received in a spreadsheet from online banking makes this process simple.

Personally, I tally up the dividends I receive in all my accounts every month in a spreadsheet. So, when January arrives, I simply sum up the dividends received in the 12 months.

The dividend stock portfolio at a high level

For passive income investors, their dividend income every year is sure to go up if they make the effort to buy safe dividend-growth stocks. These investors should make it a habit whenever financially possible to save and invest every month to every few months in quality dividend stocks at good valuations.

Dividend investors expect their dividends to grow faster than inflation. It’s quite reasonable to expect a dividend growth rate of at least 6% for a dividend portfolio that’s yielding about 3%.

At the dividend stock level

At least once a year, even passive income investors should review each dividend stock holding individually. Ensure their earnings or cash flow are still quality and that the dividends are supported by sustainable payout ratios.

Are the companies still growing at an acceptable rate? Low-yield dividend stocks are generally expected to grow their dividends faster. For example, goeasy (TSX:GSY) only yields 1.5% but its 5-year dividend growth rate is 35%. Its recent payout ratio is sustainable at about 25%. Over the next few years, the leading consumer lender will likely be able to increase its dividends by 15-20% per year

Investor takeaway

While dividend investing can be a passive strategy, it’s still good practice (and rewarding) to tally up your dividends every year to ensure they’re increasing. At the portfolio level, check that you’re getting the yield and dividend growth you target for.

At the individual stock level, ensure the dividends remain safe and are growing healthily. If you see any red flags, you should either consider selling them or holding them for one to three years to see if the business will improve.

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Disclosure: As of writing, we own shares of goeasy.

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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