investing 2026-04-22
Dividend Investing Strategy
Build cash flow and total return through carefully selected dividend stocks.
Dividend investing focuses on companies that pay a portion of profits to shareholders regularly.
Why Dividends Matter
- Cash flow — predictable income
- Discipline — companies face shareholders quarterly
- Total return — over decades, reinvested dividends matter
Yield vs Total Return
Yield = dividend / share price. A 10% yield often signals trouble. Always look at the underlying business.
Sustainable yield in 2026: quality stocks 1-4%, dividend ETFs 2-3%, REITs and utilities 4-7%.
Key Metrics
- Payout ratio (dividends / earnings)
- Dividend growth rate (5-10 years consecutive raises)
- FCF coverage
- Sector position
Dividend Aristocrats
S&P 500 companies with 25+ consecutive years of dividend increases.
Yield Traps
A stock yielding 12% usually telegraphs trouble.
Tax Treatment in the US
Qualified dividends taxed at long-term capital gains rates (0/15/20%). Non-qualified taxed as ordinary income.
Sample Allocation
- 50% diversified dividend ETF (SCHD, VYM, NOBL)
- 30% individual quality dividend payers
- 20% REITs and preferred shares