How to use this table
Just as the Dividend All-Stars have performed over the years, the ranking should be viewed as the starting point of your research, not the end. This report aims to identify companies that currently offer the best investment potential based on yield, stability and value, but it is purely fundamental analysis. Use this list to narrow down the potential investments that are worthy of additional research before deciding if they’re worth adding to your portfolio.
The ranking also does not take into account other important factors such as management or risks that could seriously affect a company’s performance. This is not to say that these factors are not important, but rather that they require a more qualitative analysis that is best done on a company-by-company basis. For the same reason, a low grade doesn’t necessarily mean a company is a bad investment or at risk of cutting its payout.
Our main goal is to narrow down the list of prospects to review so you have a reasonable starting point. To capture the full performance of the Dividend All-Stars, you would need to invest equal amounts in each of the top stocks. You would have to liquidate your portfolio at the end of the year and repeat the process with the latest top picks.
Buying the full list may not be practical for many investors. If you only have small amounts of money to invest, the $9 or more it can cost you to execute each trade — let alone the $9 to sell them later — can hurt performance. If you’re putting $10,000 into each investment, it might not matter. But if you can only invest $1,000 in each company, then it might not be all that tempting.
If you’re happy to add individual stocks to your portfolio, make sure you have a plan to limit your risk and have a clear idea of how it fits into your broader plan. As a guideline, most portfolio managers try to limit any single investment to no more than 10% of their portfolio, although even their preferred holdings are often well below that threshold.
It’s also worth considering how these investments fit into your broader plan. While dividend stocks can generate income, having too much of your portfolio allotted to one asset class may not be a suitable way to achieve your investment goals. Before you decide how to proceed, make sure you have a solid foundation before venturing into individual stocks.
Whether you’re an experienced or novice investor, consider keeping your «play» money below 10% of your portfolio to limit your risk. As always, avoid taking unnecessary risks, especially when it comes to managing your retirement portfolio.
However you decide to invest, always plan your research. Building the Dividend All-Stars requires assembly and testing time. Make sure nothing significant has changed between the time we pulled the data and now that could affect a stock’s prospects.