Building A Core Dividend Growth Portfolio With These Eight Companies

PRINCIPLE #7: THINK CORE, THINK GROWTH

My investing strategy is divided into two segments: the core portfolio built with strong & stable stocks meeting all our requirements. The second part is called the “dividend growth stock addition” where I may ignore one of the metrics mentioned in principles #1 to #5 for a greater upside potential (e.g. riskier pick as well).

Having both segments helps me to categorize my investments into a “conservative” or “core” section or into a “growth” section. I then know exactly what to expect from it; a steady dividend payment or higher fluctuations with great growth potential.

A good example of a conservative holding would be 3M Co (NYSE:MMM). 3M is a dividend behemoth showing 50% of their revenues in repetitive purchases. Their impressive R&D budget puts the company on the frontline of innovation. However, due to its important size and the fact that the company is already leading in many markets, growth perspectives can’t be astonishing. I like seeing 3M Co (NYSE:MMM) more like a bond increase its interest payment each year in my portfolio. It meets 2 dividend investing objectives: an increasing payout plus stability in any portfolio.

A good example of a growth holding would be Chevron Corporation (NYSE:CVX) at the moment. This company was added to my DSR Buy List in August 2015 as the company struggled (and still is struggling) with very low oil prices. While the company shows a strong dividend history, the fact the stock plummeted opens the door for additional growth perspectives. Since August 2015, the stock has caught up and shows a price return of +10% and pays a dividend of nearly 5% based on the cost of purchase. Obviously picking Chevron Corporation (NYSE:CVX) in August was a riskier move, this is why it is part of the growth holding and not the core one.

DO THE 7 INVESTMENT PRINCIPLES WORK IN THE REAL LIFE?

I know it was a long article, but if you have made it so far, it’s probably because you somewhat wonder if my investment principles work in the real life. As I’m fairly transparent, I have shared my portfolios returns here. You will see how they perform very well since their inception.

These investment principles have been based on academic studies (you can check them out here). But to be honest, I don’t think I am the owner of some kind of magic recipe. I just follow sound investing principles based on years of financial research.

Do you own any of these companies?

Disclaimer: We own shares of DIS, GPC, PG, BLK, WFC, HAS, MMM and CVX in our DSR Portfolios.

Disclaimer: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance.

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