The list of dividend kings is one of the most exclusive stock screener lists that exists. In order to be a dividend king, the security must have had 50 or more consecutive years of dividend increases. Look here for a full list and explanation of the dividend kings. As we experience the ebbs and flows of the market, this can be increasingly difficult for a company to do. Now, past results are not indicative of future results but we can rest assured that these companies are going to be committed to paying their dividends.
Monthly Dividend Portfolio
Our goal is going to be creating a portfolio that provides us with growing monthly dividends. Most dividend stocks pay dividends quarterly. That means we are going to be setting up a three stock portfolio to create the income we are looking for. We are also going to be purchasing shares in a ratio that provides us with consistent income every month, since the three stocks will have different yields.
The three stocks we are going to be using are Genuine Parts Company (GPC), The Colgate-Palmolive Company (CL) and Johnson and Johnson (JNJ). These stocks pay their dividends in the first, second and third month of each quarter respectively.
Genuine Parts Company
Genuine Parts Company has increased their dividend for the past 64 years. They distribute automotive, industrial business products in most of the world. Founded in 1928, they are headquartered in Atlanta, Georgia. As of this writing GPC is currently trading for $89.17 a share. Given their annual dividend of $3.16 that would give them an annual yield of 3.54%. With a payout ratio of 38.64% based on cash flow and 55.54% based on trailing 12 months of earnings. GPC’s most recent dividend increase was on 2/18/2020 of $0.0275.
The Colgate-Palmolive Company has increased their dividend for the past 57 years. They are engaged in the manufacturing and distribution of consumer products worldwide. They mainly operate in two segments, Oral, Personal and Home Care and the other being Pet Nutrition. Their portfolio includes famous brand names such as Colgate, Palmolive, Irish Spring, Hill’s Science Diet, Ajax and Speed Stick. As of this writing CL is currently trading for $75.23 a share. Given their annual dividend of $1.76 this would give them an annual yield of 2.34%. CL also has a payout ratio of 50.32% based on cash flow and 62.19% based on trailing 12 months of earnings. CL’s most recent dividend increase was on 3/11/2020 which was $0.01.
Johnson and Johnson
Johnson and Johnson has increased their dividend for the past 58 years. They research, develop, manufacture and sell various products in the health care field internationally. They own famous brands such as Listerine, Sudafed, Pepcid, Tylenol and Neosporin. As of this writing Johnson and Johnson is currently trading at $147.84 a share. With an annual dividend of $4.04 this would give them an annual yield of 2.73%. JNJ also has a payout ratio of 35.21% based on cash flow and 46.54% based on the trailing 12 months of earnings. JNJ’s most recent dividend increase was on 4/14/2020 which was $0.06.
Constructing the Dividend Kings Portfolio
When we average out the three yields of these companies, we get a yield of 2.87%. In order to smooth out our monthly income, we need to adjust the ratios that we invest in each stock accordingly. We are going to be investing in a ratio of 26.25%, 39.71%, 34.04% to GPC, CL, JNJ respectively. That means if we have $100 to invest we will invest $26.25 into GPC, $39.71 into CL and $34.04 into JNJ. There are lots of brokerages that offer fractional shares if you want to hold true to this methodology. If you don’t have fractional shares through your broker, just try and be close. This will average out your annual yield to 2.87% the closer you hold to this ratio.
Let’s assume we have $10,000 to invest and build this portfolio. That means we are putting $2,625 into GPC for 29 shares with $39.07 left over, $3,971 into CL for 52 shares with $59.04 left over and $3,404 into JNJ for 23 shares with $3.68 left over. Let’s also assume that we did this right at the beginning of the year so we can go through and collect dividend for an entire year. The year ends up looking something like this:
Year of Dividends
|January||29 Shares $39.07 + $22.1125||52 shares $59.04||23 shares $3.68|
|February||29 shares $61.1825||52 shares $59.04 + $22.36||23 shares $3.68|
|March||29 shares $61.1825||53 shares $6.17||23 shares $3.68 + $21.85|
|April||29 shares $61.1825 + $22.91||53 shares $6.17||23 shares $25.53|
|May||29 shares $84.0925||53 shares $6.17 + $23.32||23 shares $25.53|
|June||29 shares $84.0925||53 shares $29.49||23 shares $25.53 + $23.23|
|July||29 shares $84.0925 + $22.91||53 shares $29.49||23 shares $48.76|
|August||30 shares $17.8325||53 shares $29.49 + $23.32||23 shares $48.76|
|September||30 shares $17.8325||53 shares $52.81||23 shares $48.76 + $23.23|
|October||30 shares $17.8325 + $22.91||53 shares $52.81||23 shares $71.99|
|November||30 shares $40.7425||53 shares $52.81 + $23.32||23 shares $71.99|
|December||30 shares $40.7425||54 shares $0.90||23 shares $71.99 + $23.23|
Dividend Kings Paying Dividends
As you can see, as the year progresses we are able to purchase more shares and increase our positions. We are also averaging around $23 a month of income. As our dividends continue to roll in, we continue to grow our positions, thus getting paid more each month. We also have not taken into account any change in stock prices here. It is important to remember that the dividend kings have a long track record of increasing their dividends and will likely do so in the future.
Other Ways to Make Money
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Do you hold any dividend kings in your portfolio? Let me know in the comments below what your favorites are!