20 Dividend Growers for 2023
This post describes why I bought 20 dividend aristocrats this week and how I decided which ones to choose.
The method for choosing 20 stocks described below demonstrates how its possible to build a high-quality stock portfolio without doing any fundamental research. Yes, you read that correctly. I built a 20 stock portfolio containing high quality companies without doing any research on specific companies.
Which Stocks?
The primary objective of my entire portfolio is to generate enough income from my investments to support my lifestyle (essentially FIRE). To do this, a large portion of my portfolio is allocated to profitable, dividend paying, blue-chip stocks.
This means I love what are known as Dividend Aristocrats.
What are Dividend Aristocrats?
A dividend aristocrat commonly refers to a company that is a member of the S&P 500 and has increased its dividend for at least twenty-five consecutive years.
Click Here for a List of Current Dividend Aristocrats.
Which Dividend Aristocrats should I Choose?
This year, I decided to add 20 Dividend Aristocrats to my portfolio. Since dividend aristocrats are found in ten different business sectors, I decided to buy two stocks from each sector to make a portfolio of 20 individual stocks.
But, my investment policy also notes the sectors I exclude according to my values. So, I will not invest in oil & gas companies for this reason. This is a moral constraint I put on myself.
Also, for the purposes of choosing dividend aristocrats this year, I’m also going to exclude companies in the real estate sector from this portfolio since real estate is a separate asset class according to my own investment policy.
By excluding companies in the energy & real estate sectors from my 20-stock dividend aristocrat portfolio, it will leave me with only eight sectors to choose from. This means I will choose two stocks from each of the eight sectors, then four additional stocks from any sector.
Choosing the Dividend Aristocrats
To further screen the universe of potential dividend aristocrats to choose from, I also decided to exclude any dividend aristocrat that I already own. Since I already own a few dividend aristocrats in my portfolio, this further whittles down the potential possible stocks that I might add.
After excluding certain sectors and a few individual stocks, I decided on a method to choose from the remaining possibilities. I did so by assigning each stock from each sector a sequential number, then I used a random number generator to draw numbers to determine which stocks I will invest in while still investing in two companies from each business sector to provide diversification.
Here is a summary of the steps I took to choose a dividend aristocrat portfolio:
- Used my investment policy to determine whether to make an allocation to dividend aristocrats
- Picked how many stocks to buy from the total universe of dividend aristocrats
- Excluded two sectors from the total universe (one because of values criteria, one because of asset allocation strategy)
- Randomly picked two dividend aristocrat stocks from each of the eight remaining business sectors
- Randomly picked four additional dividend aristocrat stocks from any sector
Here is the result:
| Name | Ticker | Price | Yield | Sector |
| Genuine Parts Company | GPC | 175.57 | 2.04% | Consumer Discretionary |
| Lowe’s | LOW | 200.03 | 2.10% | Consumer Discretionary |
| PepsiCo | PEP | 181.88 | 2.53% | Consumer Staples |
| Archer-Daniels-Midland | ADM | 93.65 | 1.71% | Consumer Staples |
| AFLAC | AFL | 72.14 | 2.33% | Financials |
| Cincinnati Financial Corp | CINF | 104.63 | 2.64% | Financials |
| West Pharmaceutical Services | WST | 241.14 | 0.32% | Healthcare |
| AbbVie | ABBV | 162.77 | 3.64% | Healthcare |
| Cintas | CTAS | 458.78 | 1.00% | Industrials |
| W. W. Grainger | GWW | 563.00 | 1.22% | Industrials |
| Automatic Data Processing | ADP | 241.40 | 2.07% | Information |
| IBM | IBM | 141.51 | 4.66% | Information |
| Ecolab | ECL | 147.76 | 1.43% | Materials |
| Air Products & Chemicals | APD | 311.98 | 2.08% | Materials |
| Consolidated Edison | ED | 97.24 | 3.25% | Utilities |
| NextEra Energy | NEE | 84.55 | 2.01% | Utilities |
| Caterpillar Inc | CAT | 239.58 | 2.00% | Industrials |
| Dover Corp | DOV | 136.37 | 1.48% | Industrials |
| Procter & Gamble | PG | 152.63 | 2.39% | Consumer Staples |
| McCormick & Company | MKC | 84.19 | 1.85% | Consumer Staples |
Portfolio Metrics
I decided to weigh the portfolio according to share prices since I will buy a small number of shares using the remaining commission free trades from my TD Easy Trade account. The largest holding will be Grainger at 14.47% and the smallest will be AFLAC at 1.85%.
With this portfolio of 20 stocks, we can see the weighted average dividend yield is 1.89%, which is close to the S&P 500 yield of 1.70%.
Final Thoughts
The methods used in this post to pick 20 stocks might seem too simple for some investors. And, other investors might worry about whether the stocks picked are good investments or bad ones (how can we tell?).
These feelings are a gut reaction. But like most things in life, simple is good.
Remember that the market for S&P 500 stocks is one of the most efficient markets in the world. And no individual investor can consistently generate alpha.
Let us also remember that the risk of any individual stock can be diversified away by building an investment portfolio containing different asset classes and several different investments from each asset class.
Final Thoughts
More important than a method for picking individual stocks is a method for making enough total investments through your lifetime. The next biggest challenge is holding those investments for the long-run without letting emotions guide when to sell.
Statistically speaking, making investments and then holding on to those investments is often way more important than deciding whether to buy stock A or stock B.
Click Here to read more about the investing services that we provide.