The Finance Blogger

Buying investment grade dividend paying stocks to maximize your income yield and also positioning yourself for ongoing increases is a great way to grow your income stream and also protect yourself from the fixed income that many seniors are facing due to being on fixed pensions. Friends of ours are complaining that they are on a fixed pension and that sometime in the next 10 years their standard of living is going to decline depending on how bad inflation is. They retired early, have no desire to keep working and are spending well i.e enjoying themselves while they have their health. But they are still worried about the future due to their fixed income pensions.

Get a Raise Every Year with Dividend Stocks that Increase Their Dividends

One way to deal with this issue is to invest in companies that not only pay good dividend yields, but also have a history of increasing their dividends year over year. These people who invest in this manner receive an automatic raise every year that the dividends are increased. They may be getting a pension, but they are also earning money from their investments and receiving a raise every year. There are quite a number of companies that have a history of paying dividends every year as well as increasing them on a regular basis. Select wisely and stick to the blue chip stocks when you are looking for dividend paying stocks.

Your stoke broker or investment adviser should be able to provide you with the information that you need. Always invest in a diverse manner. Don’t put all of your money with one stock  or with one investment adviser or broker. If it sounds too good to be true it probably is not true. You could get scammed. So take the time to do your own research. Talk to several advisers and then make your own decision.

Our Strategy – Buy Dividend Stocks  For Income Yield

We like dividend paying stocks that are in the investment grade category. They should pay a yield of at least 4% and not more than 6%. They should also have a history of increasing the dividend payout each year. Right now as we write this post, anything higher than a 6% yield is beginning to fall into the high risk category. Either the dividend could be cut reducing the yield. Or the company is not going to raise dividends for some time until the rest of the market catches up.

Sure there are some bumps along the road. But if they have a track record of paying dividends each year and increasing them, then they have a good record that you can generally count on. There is still risk. Since you are investing for the long term, you need to monitor your investments on a regular basis.

Monitor your Investments

Some people suggest you should meet with your adviser once per year to review your investments. We believe you should be monitoring them on a monthly basis at the minimum and you should also with your adviser quarterly.

If for some reason your stock portfolio is not meeting your objective for dividend growth and yield, then you need to decide if the situation suggest you should sit tight or if you should take some action. At the very minimum, review each if the stocks in your portfolio and make an informed decision. At various times some stocks will do better than others and may require re-balancing of your portfolio to maintain your diversification requirements.  Maintain your strategy of diversification, yield and dividend income with blue chip stocks that will protect your investments over time.

Your comments on this approach are welcome. It is a good approach given current prevailing interest rates on bonds and mutual funds. Dividend yields are in the 3% to 6% range.

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