Best Dividend Stocks to buy in January 2024
Hello everyone! Welcome to the first stock buying session of 2024
As we always do, we will look together for the best companies, with an eye on making sure our House of Dividends public portfolio is properly diversified accross industries.
In this series of articles called "Monthly stock buying session", I will walk you thru my 10 min/month dividend investment method to generate a growing passive income flow to plan retirement and live off dividends. I will show you how I make my investment decisions every month taking less than 10 min and provide full transparency of my stock picks and show you real portfolio performance (something that nobody else does)
As usual, I will start this article with a reminder of the assumptions of the 10-min investment method
Assumptions
- I will invest $1,000 every month in Dividend Aristocrats stocks
- All dividends will be reinvested (Never use the automatic reinvestment tool offered by brokers)
- I will buy the best stock each month, except for diversification constrains once the portfolio starts to grow (we don´t want to concentrate too much risk in a few stocks)
Target companies aligned with my investment will meet below conditions:
- Pay interesting dividends yields (>3% depending on current market conditions)
- Have decent dividend growth ratios (ideally above inflation) and had been incrementing dividends for at least 25 consecutive years (All dividend aristocrats meet this last condition)
- Companies with reasonable payout ratios, since I focus on long term investments. Companies with high payouts are more likely to cut dividends that those with a reasonable one. (With exceptions, depending on the business sector, reasonable payouts are below 65%)
- Healthy business model. I won´t invest in companies with high debt ratios, nor companies with decreasing sales or profit margins. I will also avoid companies with known relevant legal issues until potential contingencies are cleared
Analysis
To start our research we will reference to the dividend aristocrats section at House of Dividends website https://houseofdividends.com/dividend-aristocrats-updated-list/ , where you will find the entire list o 2024 Dividend Aristocrats with updated ratios.
By doing this we can have a first picture of were the market is and what are the different price ranges that determine yield rates and the different levels of risks considering stocks payouts.
Let´s look at the top 10 dividend aristocrats by growth potential.
After screening the top positions in the list we had into consideration that some of them are either paying dividends below 3%, have small poteltial for growing dividend yield or are already part of the public House of Dividends portfolio.
Since our public portfolio is still at the early stages we will continue to look for quality stocks, but with an eye on diversification.During the early stages of a portfolio and knowing that we will be invested for more than 20 years.
We prioritize to have a solid base of diversified stocks with above market growth potential, instead of just picking those with the highest dividend yields.Let´s give a closer look to NextEra Energy Inc. (NEE)
NextEra Energy Inc current ratios:
- NEE Dividend yield is 3,04%
- NEE Payout ratios is 81% (a bit high, but still within historic company rates)
- Growth target price is almost 14% showing the confidence of analysts on the company prospects
- Avg 5yrs yield growth of 10%
Conclusion
NextEra Energy Inc. (NEE) offers one of the most impressive dividend growth average, being around 10% of annual dividend growth for the last 5 years.
This growth track record, combined with a very decent dividend yield of $3,08 and adding exposure to a sector that is not present in the House of Dividends public portfolio.
It is also important to mention that betting for a high growth company (NEE) in January is not casual. We are very close to the announcement of a new annual dividend increase this month which may hopefully be very interesting.
As a result, we are buying 16 shares of NEE at $61,18 totalizing an investment of $979
Happy investments and see you for next month buying session!
Note for enthusiastic:
There are other tools that I have developed for myself that I do use to facilitate and speed up my stock picking process covering many other ratios and indicators I didn´t mention in this simplified analysis. Some of those are currently being enhanced and adapted to make it available to you on this website. If you like this article or are interested in receiving a notification when new tools or content is available register to our newsletter at the bottom of this page (I don´t spam).
Disclaimer: The information provided in this article is for educational purposes only and should not be considered as investment advice. Always conduct thorough research and consult with a financial advisor before making any investment decisions.
