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In my Dividend Growth Portfolio, inclusive of dividend stocks, I reinvest dividends every month.
I let dividends accumulate for 4-5 weeks, then pick out a nice addition for my Dividend Growth Investing portfolio. Sometimes I buy more of a stock that I already own, while other times I start an all-new position.
In the last month, incoming dividends have accumulated to $396. So on Monday, April 12, I went shopping.
After holding my monthly “derby” among a few stocks to decide what to buy, I decided to add more shares of Verizon (VZ) to my portfolio.
Why I Selected Verizon
Verizon has been our cell-phone provider forever, and I first bought the stock in 2018. It is a high-quality company with a nice 4%+ yield.
Among the attractive qualities of Verizon are its yield (4.4%), Quality Snapshot score (22 out of 25 points), and decent valuation.
Verizon is a high-yield, slow-growth DG stock. It increases its dividend at only about 2% per year. Some investors would find that unacceptable, but it’s OK with me for a stock yielding more than 4%. I wouldn’t accept it for, say, a 1%-yielder.
I had enough money to buy 6 shares (I don’t buy fractional shares). The total amount spent was $345. That leaves $51 cash left over, which I will simply retain for investment next month.
The additional shares of Verizon will add $15 to the portfolio’s annual dividend flow, or about 0.3%.
Here’s my little lecture with every reinvestment: I know that $15 increase sounds small, but here’s the deal: If I make 12 reinvestments per year, and they each add between 0.2% and 0.3% to the DGP’s income, that amounts to a 3% increase in income without doing a thing other than reinvesting the dividends.
In other words, if every company in the portfolio froze its dividend, I would still get 3% more income over the coming 12 months.
But of course, all the rest will not freeze their dividends. In fact, so far this year, 12 companies have already announced increased payouts for 2021, and most of the remainder will also declare increases through the end of the year.
The increase in your income from reinvesting is on top of the increases the companies themselves make.
Verizon has not yet declared its increase for this year. That will come later in the year for the payout to be made in November.
Closing Thoughts
This addition to Verizon seems ideal for my DG portfolio. I get a high-quality company with a high yield and a very safe dividend.
Verizon’s dividend grows slowly, but that is offset somewhat by the fact that I reinvest all dividends, which gives my portfolio a 3% annual DGR before any raises are even considered.
This purchase is an example of opportunistically investing in excellent companies at attractive prices when they are available. As the entire market is widely considered overvalued, it’s great to find a high-quality company available for a fair price.
That’s generally how I invest. I keep surveying the landscape for companies that fit my needs and grab them when their prices are fair or on sale.
I started this morning with a list of 11 possible dividend investing stocks for this purchase, narrowed the list down based on quality, yields, valuations and other characteristics, and Verizon emerged as the best company to add this time around, and possibly one of the best stocks to buy now.
I don’t care what order I buy stocks in; I just need them to meet my requirements when I buy them. Verizon does that nicely.
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LEGAL DISCLAIMER: Please consult with a licensed investment professional before investing any of your money. Never invest in a security or idea featured on this channel unless you can afford to lose your entire investment. If your money is not FDIC insured, it may decline in value. Dave is not a licensed financial advisor, tax professional, or stockbroker and he does not purport to be. Links above may include affiliate commissions paid to the owners of Dividends and Income and help support this channel.
