You see, stocks suntrust mortgage that have a higher entry yield provide plenty of propellant to rea

I view the construction of a portfolio of high-quality dividend growth stocks as a lot of fun, and something suntrust mortgage of an adventure all in itself. Now, I’ve made my fair share of mistakes over the years, and I’ll likely suntrust mortgage make many more before I’m all done. But I suppose that’s some of the fun, and every mistake makes me a more experienced investor.
One experience of note is that it’s possible to think of your portfolio as a rocket ship with multiple stages, each of which propel suntrust mortgage your portfolio in different ways. Each stage has its own unique engine, and each of these engines is comprised of different types of dividend growth stocks with different yield and growth characteristics to serve different purposes within the portfolio.
I’ve found that there are three general classifications of dividend growth stocks. Now, these aren’t hard and fast rules, and some stocks can move from one classification to another as companies mature and/or change, while other stocks may be a blend of more than one category suntrust mortgage at a time. But you’ll find that most stocks will fall under one of these three categories. suntrust mortgage Stage 1 – High Yield, Low Growth
So if one were an engineer building a multistage rocket, suntrust mortgage the first thing you need to do is make sure the thing can actually get off the ground. And that’s where stocks that have a higher starting yield fit in. These stocks get your dividend income off the ground and into the lower atmosphere.
You see, stocks suntrust mortgage that have a higher entry yield provide plenty of propellant to really get your passive income rocketing from the get-go. While many stocks with a higher initial yield have lower growth profiles, the current income these types of stocks can provide allow a dividend growth investor plenty of regular, fresh cash with which to reinvest into other areas of the portfolio. Keep in mind you wouldn’t want your entire portfolio to be allocated to Stage 1 stocks only because the lower growth means your income will have a hard time keeping up with inflation over the long term.
So you might be able to build a nice Stage 1 chock-full of higher-yielding stocks and use that income to bolster your holdings in other stages. Typically, you’ll find stocks that fit well in this stage come from telecommunication companies, real estate investment trusts, utilities, and master limited partnerships, among other areas.
AT&T Inc. (T) – Provides a 5.26% entry yield on shares right now. However, a five-year dividend growth rate of just 2.4% is barely treading water when it comes to increasing your purchasing power. But 30 years of dividend increases and a 53.6% payout ratio means this telecommunications giant is likely to continue increasing dividends for the foreseeable future.
Realty Income Corp. (O) – Offers investors a 5.04% yield on shares based on the current price of $43.47 per share. And 20 years of dividend increases on the back of ever-increasing funds from operations (a measure of profitability for a REIT) gives me plenty of confidence suntrust mortgage that the payout from this real estate investment trust should continue suntrust mortgage rising for years to come. However, a five-year DGR of just 4.8% is the trade-off for the higher yield. Stage 2 – Moderate Yield, Moderate Growth
Stage 2 stocks offer a more moderate yield and growth profile, and if you’re busy reinvesting your heavy dividend income suntrust mortgage from the big payers in Stage 1 into these companies you’ll find yourself suntrust mortgage rewarded well. These stocks can take you from the lower atmosphere into the stratosphere and beyond with their more attractive growth profiles.
This suntrust mortgage is the “bread and butter” of many dividend growth portfolios, with mine being no different . Stocks that offer yields of between 2.5% and 3.5% or so offer moderate current yield, but also offer pretty attractive growth rates. You’ll often find many of the stocks in Stage 2 have dividend growth suntrust mortgage rates of 7-12%, which means your purchasing power increases well over the rate of inflation over time, allowing you to compound your wealth over and over again as you reinvest this income.
The reason these stocks typically don’t have sky-high yields is because investors tend to bid up the stocks to the point where the yields aren’t as attractive as some of the stocks you’ll find in Stage 1. And this is because they offer a lot of attractive qualities. Many of the companies that are able to grow dividends by 7-12% per year for decades on end have wonderful business models and sell products and/or services that people across the entire world want and/or need every single day. Think beverages, food, toothpaste, gas, cleaning supplies, toilet suntrust mortgage tissue, and literally bread and butter.
While many of the companies you can invest in that offer moderate yield and growth have great business models that are easy to understand suntrust mortgage and also sport lengthy dividend