How to Weight Dividend Stocks in Your Portfolio

About every quarter, I update my weights for my dividend paying stocks in my retirement portfolio. Let me first summarize the idea behind my weighting scheme. I do not normally believe in weighting by market capitalization, nor do I generally believe in equally weighting stocks. There are better ways to figure out how to distribute the money in your portfolios.

I suggest a weighting mechanism for dividend paying stocks that rewards a company with a higher weight as it makes good decisions that are in the interests of shareholders. There are several variables I use when weighting high-dividend stocks in client portfolios. I will use three of these variables as an example here. They are the dividend yield, the five-year annualized growth rate of the dividend, and the company’s debt to equity ratio.

Source: MinyAnville

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