If you haven’t read my first few posts that go into detail about why I created this site and what my plan is to generate enough money to retire with I’d recommend going back and doing that before reading this article. Here’s a link to the first post. That said, I thought I’d take a moment to go over what I’m going to do for the dividend growth portion of my portfolio for the time being. Since I’m one of those knuckleheads that thinks they can beat the market I decided I still want to try investing in individual stocks in my Roth IRA. I may eventually go to a mix of ETFs and individual stocks at some point if this experiment turns out to underperform, but either way I’d argue it’s a good idea to take a look at some dividend growth ETFs to get started. After doing a little research I found a useful article on TheStreet called 7 Top Dividend Growth ETFs For 2021. As it says in the title, this article covers 7 different dividend growth ETF funds, and after reviewing the information about them in the article and looking into them a little further on Morningstar the two ETFs that I liked are the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) and the Vanguard Dividend Appreciation ETF (VIG). One strategy could be to simply buy one or both of these and leave it at that, but I decided I’m going to review them annually and pull individual stocks out of them.
To get a list of all the stocks in the NOBL ETF, you can just look it up on Morningstar and then go to the portfolio tab. After that’s done you can do the same for VIG and then after you have the full list for both ETFs in a sheet in Excel you can sort by name and trim out the stocks that don’t appear in both. After that, you can basically pick out the ones you like. In my case I like to look up the CEO rating on glassdoor and then make sure it’s at least at 80%. There are exceptions to this rule, but the idea is the success of the company depends on the integrity of the leadership, and I think this is a good indicator to go with. By the way as a general rule I set a threshold of 90% for high growth stocks, but dividend growth stocks are usually much larger companies and in that case I expect the threshold would be lower simply due to the fact that companies run into more issues as they get larger, and it gets harder to avoid hiring some bad apples that do things like give the CEO a bad rating on glassdoor even though they are basically selfish people and don’t have enough self-awareness to recognize that is why they had a bad experience. I always leave myself the option to make exceptions to this rule, but I also think that if you are considering investing in any company and there are thousands of reviews on glassdoor and the CEO has a 15% approval rating, you may want to consider other options.
On a side note, Morningstar only shows the top 25 stocks in the ETF unless you have a premium subscription, but if you don’t you can probably login to your broker and look up the stock to get the full list. Morningstar also gives you the sector information in this list, and the MOAT rating if you do have a premium subscription. I usually like to pick out stocks in a variety of sectors and stick with wide MOAT stocks, but again I’m willing to make exceptions for individual companies that I think will do well. Here’s what it looks like if you don’t have a premium subscription or you are logged out:
Once you have your list you can start buying the stocks when you feel they are worth buying. After that you can review these lists once a year just to be aware of stocks that were added or removed from the ETF(s) you like. I do have another system in place that I use to setup buy points for all of the individual stocks I’m interested in, but I’m not sure that it’s good enough to share with anyone else yet. If I ever feel it’s worth your consideration I may end up doing another article on that topic.