Why I am adding dividend aristocrats in my portfolio?

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Hello folks,
Happy New Year! This is my first post in 2020 and looking forward to writing more this year! My new year resolution!
I hope all you had well deserved holiday time with family & friends and charged up for 2020 ahead!
In this post, I will discuss one of the cornerstones of my portfolio strategy as part Financial Independence (FI) journey. As you know, I am big proponent of dividend investing due to cash generation and reinvestment at this point of my journey. Ultimately after reaching FI, I like to cover most of my living expenses with dividends only, without touching my principle.
While screening for a dividend stocks, I usually use the dividend aristocrat list for that year. By the way, this aristocrats list are not only for aristocrats, but for average Joe like us to invest and get rich😊
Here are few facts about dividend aristocrat companies:
1.    They are all part of S&P 500 list, so usually companies with large market cap.
2.    Not only they provide good dividend but also required to increase dividend payment consequently for at least 25 years.
3.    These are large and established companies with steady growth and usually do better in recession times compared to fast growing companies.

In 2019, there were about 57 S&P 500 companies listed as Dividend Aristocrats. You can get full list over this link https://us.spindices.com/indices/strategy/sp-500-dividend-aristocrats
Don’t get surprised to see if you find very familiar  soft drink or grocery store brands in that list 😊
        


This list encompasses most of the sectors but tilts bit toward Consumer staples and Industrial sectors.


Historically this list of stocks has shown producing both higher dividend and capital gain.
Here is an example how dividend plays important part on total income in good or bad decades in stock market history:

This following plot basically summarizes my strong inclination towards dividend reinvestment until I reach FI. Dividend reinvestment was really putting my portfolio growth into turbo charge mode with capital gain.



My current strategy is to automatically reinvest the dividend to the same stock. For example, if I receive $3 dividend from a stock, then buy a fractional share of that stock. In future, I am planning to accumulate all the paid dividends in every quarter and then buy cheaper stocks that seem good buy. Currently dividend reinvestment  giving me good compounding effect. Here is some more performance of compounding effect that I find so compelling!



This it for today, hope to catch up again soon in a new post!

Disclaimer: This article shows my personal opinion and its for entertainment purpose only. This is no way professional financial advice. You may seek professional advice or conduct own research before investing.

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