Best “Set it and Forget it” Dividend Stocks
Most investors don’t have time to monitor their portfolio constantly, so creating a set it and forget it dividend stock portfolio can be the perfect solution.
However, picking the best companies to invest in is challenging, and you must be aware of your risks.
This article will cover everything you need to know about creating a passive dividend portfolio and the best stocks for this investing strategy.
What is a Dividend Stock?
A dividend stock is a company you can buy that will pay you dividends for owning shares. Dividend investing is one of the purest forms of passive income since you don’t have to manage them much.
Dividend yield percentages differ depending on the company, so you must research which ones are best for your portfolio. Additionally, you must be aware of yield traps or stocks that pay a high dividend that can’t sustain it.
“Set It and Forget It” Dividend Stocks Portfolio
Holding dividend companies is a great set it and forget it strategy because you actively get paid without having to monitor your account.
Owning individual companies is more work than investing in ETFs. Still, if you perform your due diligence correctly, you can outperform the overall market by buying individual stocks.
The benefit of dividend stock portfolios is that these companies are generally less volatile than growth companies. Therefore, if the market conditions become unfavorable, your portfolio value will not fluctuate much.
The Best “Set It and Forget It” Dividend Stocks
Every year, S&P Dow Jones Indices updates a list of Dividend Aristocrat stocks. To make this list, a company must be a part of the S&P 500 and have increased its dividend every year for 25 years or longer.
The Dividend Aristocrats list is an excellent place to start researching companies to buy for your set it and forget it dividend stock portfolio.
To make your research even easier, I have created a list of my favorite companies from the Dividend Aristocrats list below.
Procter & Gamble ($PG)
Procter & Gamble is a reliable dividend payer due to the inelasticity of the products it sells. Products like toothpaste are still deemed necessary even when the economy isn’t doing great.
The stock has a P/E ratio of 23, meaning it trades at a reasonable valuation but is not cheap enough to be considered deep value. Nevertheless, Procter & Gamble is an excellent addition to any set it and forget it dividend stock portfolio.
Dividend yield: 2.68%
5y performance: 79.93%
Colgate-Palmolive ($CL)
Colgate-Palmolive is another company that sells relatively inelastic goods like toothpaste and personal care products. Value companies like this generally perform well in harsh economic conditions, making it an excellent passive income investment.
The company’s stock price hardly fluctuates and pays a dividend yield of nearly 3%, making it great for those seeking to generate passive income with dividend payments. However, it is worth noting that the 5y performance, including dividends, is not amazing at just under 17%.
Dividend yield: 2.57%
5y performance: 16.81%
Sysco ($SYY)
Sysco is the largest food-service distributor in the United States, making it an exceptionally stable company. Moreover, food is a basic human necessity, so Sysco should do well in most economic conditions.
Additionally, the company generates over 80% of its revenue in the United States, making it less susceptible to global economic risks. It pays a dividend yield of over 2%, making it ideal for passive income investors.
Dividend yield: 2.38%
5y performance: 79%
AbbVie ($ABBV)
AbbVie is a pharmaceutical company that was spun off from Abbott in 2013. The company generates nearly half of its profit from its top drug Humira.
Pharmaceutical companies generally get a bad rapport, but AbbVie is stable and has a solid P/E ratio of just 19. Additionally, AbbVie has a market cap of $262b.
Dividend yield: 4.07%
5y performance: 98.67%
Target ($TGT)
Target is a leading merchandise retailer in the United States that offers products of all sorts, including electronics, food, personal care, and household essentials. Virtually all of the company’s revenue is generated from the United States after it exited Canada in 2015.
Most of its stores are massive and average more than 125,000 square feet, yet Target still has a significant e-commerce presence, which generates around 19% of its sales. In addition, the company pays a dividend of over 2%, making it an excellent company for dividend investors seeking consistent income.
Dividend yield: 2.70%
5y performance: 213%
ExxonMobil ($XOM)
ExxonMobil is an oil and gas company that does business all around the world. The company produces, explores for, and refines oil.
The company looks impressive on paper as it has a P/E ratio lower than 10, meaning it is nearly a deep-value investment. ExxonMobil generates consistent revenue but had a hiccup in 2020 when the Covid-10 pandemic sent oil prices exceptionally low.
Dividend yield: 3.20%
5y performance: 139%
Set It and Forget It Dividend Stock Portfolio | Bottom Line
Investing in dividend companies is one of the best ways to create a set it and forget it portfolio due to the nature of dividend investing. Regardless of where the stock price goes, you will undoubtedly continue to receive dividend payments, especially from these Dividend Aristocrats.
Creating a set it and forget it portfolio with ETFs is another way to invest passively, but the return potential is theoretically lower. However, if you pick optimal individual companies, you can beat the ETF returns.
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As Always: Buy things that pay you to own them.
-Josh
Blog Post: #074
