How to use this table
As well as the Dividend All-Stars have performed over the years, the ranking should be viewed as the starting point for your research, not the end. This report aims to identify companies that offer the best investment potential now, based on yield, stability and value, but it’s a purely fundamental analysis. Use this list to narrow the prospective investments worthy of additional research before deciding whether they deserve to be included in your portfolio.
The ranking also doesn’t account for other important factors like management or risks that could seriously affect a company’s performance. That’s not to suggest those factors aren’t important, but that they require a more qualitative analysis that is best done on a company-by-company basis. By the same token, a low grade doesn’t necessarily mean a company is a bad investment or is 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 have to invest equal amounts into 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.
For many investors, buying the complete list may not be practical. If you have only small sums of money to invest, the $9 or more it may cost you to execute each trade—not to mention the $9 to sell them later—can be a drag on performance. If you’re parking $10,000 into each investment, that may not matter. But if you’re only able to invest $1,000 into each company, then it may not be as enticing.
If you’re comfortable adding 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 guide, most portfolio managers try to limit a single investment to no more than 10% of their portfolios, although even their favourite holdings are often far below that threshold.
It’s also worth considering how these investments fit into your broader plan. While dividend stocks can generate income, putting too much of your portfolio against one asset class may not be an appropriate way to achieve your investment goals. Before deciding 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 under 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 to do your research. Building the Dividend All-Stars takes time to assemble and check. Between the time when we pulled the data and now, ensure nothing material has changed that could undermine a stock’s prospects.