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Income Investing with Dividend Stocks

3 Easy Ways to Boost Your Income

Written by Brian Hicks
Posted June 17, 2014

When I was a stockbroker with a Wall Street firm, it was very common to make fun of investors focused on income.

In the old days, many bonds came with coupons that investors clipped and then cashed. Nothing was worse than being labeled a “coupon clipper.”

But with bond interest rates remaining at record lows and concern over rising inflation, investors are hungry for higher yields and have developed a keen appetite for collecting dividends.

It’s about time.

Dividend-paying stocks provide a consistent stream of income for their shareholders, with the bonus of lower risk compared to high-growth stocks.

What many don’t know is that numerous studies show that over time, dividend-paying stocks greatly outperform their go-go growth stock brothers.

Dividends also better align management with the interest of minority shareholders and can help investors identify healthy companies with strong balance sheets and cash flows.

A word of caution, though: nothing can tank a high-dividend stock faster than a cut in its dividend. So you want entrenched, well known consumer brands plus a strong record of management protecting and growing a company’s dividend to go along with above-average current dividend yield.

Why You Need to Go Global

Don’t forget to look overseas in putting together your dividend-rich portfolio.

Take the Asia-Pacific region, for starters.

In 2012, companies in the MSCI Asia-Pacific Index paid out more dividends than companies in the S&P 500. And according to Matthews’ Funds, from 2002-2012, Asian companies grew dividends at a compound annual growth rate of 18% compared to 10% for the S&P 500.

Japan, China, Australia, Taiwan, and Hong Kong are the biggest dividend payers in the region.

Europe also offers some good opportunities, such as France Telecom with its 8.9% dividend yield. British American Tobacco (NYSE: BTI) is another good one that has a 4.2% dividend yield and a 17% annual dividend growth rate over the past five years.

In addition, exchange-traded funds (ETFs) have made putting together a low-cost basket of dividend companies a snap. Here is a global triple play that will supersize your dividend income...


First, look at the Global X SuperDividend ETF (NYSE: SDIV), which tracks the performance of 100 equally weighted companies that rank among the highest dividend-yielding equity securities in the world.

SDIV provides good diversification with exposure to REITs (22%); consumer discretionary stocks (16%); telecommunications (16%); financial services (10%); utilities (8%); banks (5%); consumer staples (5%); energy (5%); industrials (5%); insurance (3%); technology (3%); and health care (2%).

About 32% of the companies in the basket are based in the U.S., 24% in Australia, 10% in Great Britain, 6% in Canada, and 4% in Singapore, among others.

Second, add a dash of one of my long-time favorite ETFs, the PowerShares International Dividend Achievers (NYSE: PID). To get into this exclusive basket, companies have to have a record of increasing dividends for five consecutive years. The United Kingdom and Canada make up 50% of its holdings, with the U.S. at only 6%.

Finally, to get more Asia and emerging market exposure, blend in some of WisdomTree’s Emerging Market Equity Income ETF (NYSE: DEM).

DEM has 20% exposure to Taiwan, as well as 20% to Brazil. Telecom companies make up a majority of the companies in this basket, and you can expect it to distribute dividend income in the area of 5% annually.

With this global triple play, your stock portfolio will get a welcome shot of income.

Until next time,

Carl Delfeld for Wealth Daily

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