3 Easy Ways to Build an Immediate Dividend Portfolio


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Anxiety is the dizziness of freedom.

Søren Kierkegaard

I've come to the point in my life where I am really starting to question my own existence…

What am I doing here? Why do I do the things I do? What is the meaning of this absurd journey we call life?

Maybe it's because I am getting older. Maybe it's because I'm raising children. Or maybe I'm suffering from the existential angst that we all have to face at some point in our lives.

Now, I'm not here to give you a philosophical lecture — far from it. I am in no position to do so, as I am more confused about life every waking hour (which is in and of itself a philosophical topic for another day).

Investing-wise, however, I know exactly what works and why.

You see, there is a very important lesson to be learned about investing from the trials and tribulations about our everyday decisions. If you allow all of these dizzying thoughts to completely consume your thinking, you'll never even get to the point where you can make any decisions at all, much less live a fulfilling life.

That is the definition of analysis paralysis.

Here’s how the experts explain it…

Analysis paralysis is an anti-pattern, the state of over-analyzing (or over-thinking) a situation so that a decision or action is never taken, in effect paralyzing the outcome. A decision can be treated as over-complicated, with too many detailed options, so that a choice is never made, rather than try something and change if a major problem arises.

A person might be seeking the optimal or “perfect” solution upfront, and fear making any decision which could lead to erroneous results, while on the way to a better solution.

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Søren Kierkegaard — the Danish philosopher responsible for the above concept, and overall mind-bending existentialist — believed that we really cannot know our true selves until we stop all of that internal chatter and actually act on our thoughts. That means taking action and actually doing something…

Actions speak louder than words, as it were.

I often get questions from my Crow's Nest readers that hit at this very phenomenon. Many readers have never invested before. Others have, and were burned by the market. Others still have invested for decades, yet still can't quite put their finger on exactly what they should be investing in and why.

There are so many options out there: thousands of stocks, boatloads of mutual funds, CDs, treasuries, IRAs, precious metals…

Now we're subjected to mind-boggling investments like cryptos, SPACs, and NFTs.

I don't blame anyone for being confused or overwhelmed. I get it.

Here's a variation of a Kierkegaard quote that I shared with one anxious reader who just wanted a simple answer for getting started…

Life can only be understood backwards; but it must be lived forwards.

One of the biggest caveats in investing is “past results do not guarantee future performance.” I would like to respectfully disagree…

My favorite investment banks on the opposite of this axiom. I believe that past results are pretty much the most rock-solid way to determine investments for the future.

You see, I have a love of “dividend aristocrats” — stocks that have raised their dividend consistently for at least 25 years running. I dedicate a lot of my portfolio to these stocks — and for good reason.

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They are ironclad investments in times of uncertainty in the market. Dividend-paying stocks are the major sources of income for investors when returns from the equity market are either low or negative.

Dividend-focused stocks are safe not only because you still get dividend checks whether the market goes up or down, but also the sheer stability of dividend aristocrat companies makes them far more immune to the large swings in stock prices.

It makes for an easy decision for any investor struggling with analysis paralysis.

The most common concern folks have is that they do not want to buy a dozen stocks and keep track of them all. I can totally relate. Managing a large portfolio is a very in-depth and time-consuming process.

That's why I recommend exchange-traded funds (ETFs) to anyone who wants to grow their money as easily and efficiently as possible.

For those who just want an ETF to track growing dividend aristocrats, here are three solid choices to make your life a lot easier…

ProShares S&P 500 Aristocrats ETF (BATS: NOBL)

This ETF provides exposure to 50 companies that raised dividend payments annually for at least 25 years by tracking the S&P 500 Dividend Aristocrats. The index contains a minimum of 40 stocks, which are pretty equally weighted.

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Consumer staples is the top sector, accounting for one-fourth of the portfolio while industrials, health care, consumer discretionary, and financials round off the next three spots. The fund has $7.3 billion in assets and an expense ratio of 0.35%.

It's returned 67% in the last five years, not including dividends. It has an annual dividend yield of around 2%. Its top ten holdings include dividend stalwarts like Otis Worldwide Group (NYSE: OTIS), Abbott Labs (NYSE: ABT), and Walgreens Boots Alliance (NASDAQ: WBA).

ProShares Russell 2000 Dividend Growers ETF (BATS: SMDV)

This is a more recent fund — it debuted in February 2015 — and it is currently managing around $820 million in net assets. It follows the Russell 2000 Dividend Growth Index and offers exposure to 56 Russell 2000 companies that have increased dividends every year for at least 10 consecutive years. Not quite aristocrat material, but these companies may get there if they keep up their current rate.

The index contains a minimum of 40 stocks, which are also about equally weighted.

Financial services lead the fund’s portfolio with 25% of holdings, followed by 20% exposure each in utilities and industrials. There is a 0.41% expense ratio.

The fund gained 64% since its debut and yields around 2% in annual dividends.

Its top holdings are pretty equally rated (and a little more fun). They include PetMed Express (NASDAQ: PETS), Tootsie Roll Industries (NYSE: TR), and WD-40 Co. (NASDAQ: WDFC).

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This is one of the most popular dividend ETFs out there, and it has more holdings than any other I mentioned above — by far. It holds net assets of $17.14 billion.

SDY provides exposure to U.S. stocks that have been consistently increasing their dividends every year for at least 25 years. They do this by tracking the S&P High Yield Dividend Aristocrats Index.

Sector wise, financial stocks lead with 18.72%. Industrials, utilities, and consumer defensives make up a nice balance for the portfolio with double-digit allocations each. They count heavyweights like Exxon Mobil (NYSE: XOM), AT&T (NYSE:T), and People's United Financial (NASDAQ: PBCT) among them.

It currently yields 2.73% in annual dividends.

SDY has outperformed all of the rest with an impressive 100% return over the past five years.

Any of these ETFs are solid investments for the future…

So there you have it: three easy ways to build an immediate dividend portfolio. Now it's up to you whether you'd like to get your investments started. As they say, the best time to invest was yesterday; the second best is today.

Now, let me leave you with one last Kierkegaard quote.

The most painful state of being is remembering the future, particularly the one you'll never have.

So tame the voices in your head. Crush the dizziness of freedom. Get started today.
Make sure your future is something you will not regret.


Jimmy Mengel

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Read more from Jimmy Mengel at OutsiderClub.com

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