The Importance of Selecting High Dividend Yield Companies

The inclusion of high dividend yield companies in your investment portfolio demands a discerning selection process. These companies provide a stable and predictable dividend income stream, thus playing a crucial role in achieving a favorable risk-return profile for your overall investment portfolio. Furthermore, a judicious selection of companies that pay sustainable dividends significantly reduces the risk level and enhances the probability of reaching positive investment results.

Historically, companies paying sustainable dividends have shown a lower probability of experiencing a dividend cut. Additionally, their financial health often contributes to an attractive Total Return for the investor.

Conversely, companies with a higher risk of facing a dividend cut pose an elevated probability of reducing the Total Return of an investment portfolio. The implications of a dividend cut can significantly impact stock prices, underlining the critical importance of investing in high dividend yield companies with sustainable dividend policies.

The Dividend Income Accelerator Portfolio is one such investment model that meticulously implements a strategy of overweighting companies with sustainable dividends while underweighting those with a higher risk of experiencing a dividend cut, thus ensuring a stable income stream and a favorable risk-return profile.

Before introducing the selected companies for January 2024, the detailed selection process of high dividend yield companies will be explained in greater detail, shedding light on the criteria employed in curating a portfolio of high dividend yield stocks.

Curating the Top 10 High Dividend Yield Companies

Companies with a high Dividend Yield [FWD], a Market Capitalization greater than $10B, and a reasonable P/E [FWD] Ratio are key criteria for the pre-selection phase. These parameters contribute to lowering investment risks and refining the selection to encompass companies with stable financial foundations.

A Market Capitalization of more than $10B is vital in mitigating investment risks, as companies with higher Market Capitalization commonly exhibit lower volatility, a desirable trait in investment vehicles.

Likewise, a P/E [FWD] Ratio of less than 30 eliminates companies with stock prices reflecting high growth expectations, a factor that introduces substantial volatility and risk for investors. By employing this filter, the overall risk is reduced, leading to more astute investment decisions.

Refining the Selection Process

Subsequent to the financial ratio analysis, a scrutiny of the companies’ competitive advantages is conducted. This step aims to identify companies with strong competitive advantages such as brand image, technology, and economies of scale. These attributes are vital, as companies lacking in competitive advantages are at a higher risk of financial instability, posing potential risks to investors.

The valuation of the companies is the next crucial step in the selection process. A meticulous analysis, including metrics such as the DCF model and P/E [FWD] Ratio, further refines the list of selected companies by ensuring an attractive valuation, thus aiding investors in identifying companies that are at least fairly valued.

The final step emphasizes the importance of diversification across industries and geographical regions. This strategy aims to ensure a robust investment portfolio with a balanced risk-return profile, limiting exposure to industry-specific risks and enhancing geographical diversification.

The Cream of the Crop for January 2024

• Coca-Cola (KO)
• Zurich Insurance Group AG (OTCQX:ZURVY)
• Verizon (VZ)
• AT&T (T)
• Altria Group (MO)
• British American Tobacco (BTI)
• ING Groep N.V. (ING)
• Bayer (OTCPK:BAYZF) (OTCPK:BAYRY)
• Banco de Chile (BCH)
• Realty Income (O)