Build a Dividend Kingdom in 2024 👑 💎
A Forever Cash Flowing Kingdom
In 2024, I'm turning my Portfolio into a Dividend Kingdom.
Here are 7 steps you can take to do the same:
1. Understand Where Dividends Come From
Dividends are paid out of free cash flow.
If a company generates $2 of FCF per share, and their dividend payout is $2 per share- Then their FCF payout ratio is 100%.
This means the company is having to use all their FCF to pay dividends. This leads to my next 2 points-
2. Buy Stocks with Growing Free Cash Flow
Growing free cash flow is a sign of a healthy company.
For a stock to grow their dividend payments over time, they have to grow free cash flow over time.
If you want your portfolio to be a dividend growth machine-
Then your holdings need to be free cash flow growth machines.
3. Buy Stocks with Healthy Payout Ratios
If a stock is using all their free cash flow to payout dividends, then they have no capital leftover to reinvest back into the business.
If they can't reinvest back into the business, they can't grow FCF and dividends over time.
4. Look for Stocks with Dividend Growth Rates Above the Rate of Inflation.
This is a big one.
If a stock has a 10 year dividend growth rate of 2%, it may feel like they have a good history of dividend growth, BUT-
If a company is increasing their dividend payments below the rate of inflation, then that company is technically paying out less in dividends every single year. Verizon is a prime example of this problem.
5. Remember There Are 3 Different Ways Your Dividend Payments Can Grow
Dividend payments can grow from:
1. Contributing capital
2. Reinvesting dividends
3. Your holdings increasing dividend payouts
Early on, dividend income grows mainly from contributing capital.
But as the snowball starts rolling, dividend income grows mainly from reinvesting dividends and your holdings increasing dividend payouts.
6. Track Your Dividend Portfolio
What gets tracked, gets managed.
Everyone wants to live off dividends.
But If you aren't actively:
tracking your dividends
trackings expenses
projecting what your portfolio will look like in the future
Then you no idea if you are behind, ahead, or right on track.
7. Remember, You Are Closer Than You Think
100k is 25% of the way to $1M.
Don't believe me?
It's true.
If you’d like to join a group of investors who receive a spreadsheet with a list of undervalued dividend stocks at the end of every month, then consider becoming a paid subscriber!
If you want to learn more about building a dividend kingdom in 2024, then I suggest you watch this video:
That’s all for now.
See you next week!
Dividendology