Building out a portfolio over the course of years is one of the most rewarding parts of being a long-term investor. I kind of see my own portfolio like a painting.
It’s something you visualize at the outset. Then you slowly bring it to life over time. You fill it in. You touch it up over here. Add some color over there.
Before you know it, it’s a masterpiece. But where to start? What does a small portfolio potentially look like? And what if you want a yield on a small portfolio that smashes the market?
I’ve got you covered. Today, I want to tell you about a mini portfolio of three totally different dividend growth stocks, offering a blended yield of 5.7%. Ready? Let’s dig in.
The first dividend growth stock of this mini portfolio is Universal Health Realty Income Trust (UHT).
Universal Health Realty Income is a real estate investment trust with a market cap of $780 million.
This is a stock I’ve never covered on the channel before. But it’s interesting because it gives you exposure to two different areas simultaneously: healthcare and real estate. This is a healthcare REIT that focuses on medical office buildings. It’s a formidable one-two punch. That’s why it shouldn’t be surprising that this stock has an amazingly long track record for consistently growing dividends.
This REIT has increased its dividend for 36 consecutive years.
Yep. Almost four straight decades of ever-bigger dividends. This is a super consistent dividend payer and grower. Plus, the stock yields a market-smashing 5.0%. That’s almost four times higher than the broader market’s yield. Now, the 10-year DGR of 1.3% isn’t super inspiring. This is more of an income play than a compounder. But with a payout ratio of 76.0%, based on the current FFO/share annual run-rate, the dividend is highly likely to continue flowing and growing for years to come.
This stock has absolutely cratered and now looks cheap.
It’s now down 25% from its 52-week high of $75.61. The current 5.0% yield is 130 basis points higher than the stock’s own five-year average yield. And the P/CF ratio is below 17 here. That’s not only lower than most other REITs I track, but it’s also significantly lower than its own five-year average of 23.8. If you’re looking for a high-yield play in the healthcare REIT space, this is an interesting idea.
The next high-yield dividend growth stock in this mini portfolio is Altria Group (MO).
Altria is a tobacco giant with a market cap of $89 billion.
Altria needs no introduction. It’s a massive player in tobacco, owning the #1 brand in its industry – Marlboro. Altria gives this mini portfolio exposure to the consumer space. And since the US economy is all about the consumer these days, that’s generally a pretty good place to be. You know what else is pretty good? Altria’s growing dividend.
Altria has increased its dividend for 52 consecutive years.
This Dividend King is an all-star dividend growth stock, especially for those out there that like yield. Check it out. This stock yields a monstrous 7.5%. Where else are you going to find a 7.5% yield backed by more than 50 straight years of dividend raises? The 10-year DGR of 9.1% only adds to the near-mythic status of this stock’s overall dividend profile, although recent dividend increases have been more modest. And the payout ratio is a manageable 78.4%, based on midpoint guidance for this fiscal year’s adjusted EPS.
Despite all of that dividend goodness, the stock isn’t getting a lot of love.
The stock is actually down over the last five years. And the market continues to assign it a low valuation. Based on that aforementioned guidance, the forward P/E ratio is only 10.5. That’s nearly a single-digit P/E ratio in a market that has an earnings multiple at well into the double digits. And that big 7.5% yield is more than five times higher than the broader market’s yield, as well as 190 basis points higher than its own five-year average. If you haven’t already loaded up on Altria, now could be the time to do so.
The last high-yield dividend growth stock for this mini portfolio is Verizon (VZ).
Verizon is a telecommunications conglomerate with a market cap of $224 billion.
So we covered the healthcare REIT space and the consumer space. Now we’re covering telecommunications in this mini portfolio. Which is a great thing, because 5G, mobile data, and the Internet of Things are all set to explode over the coming years. Can you imagine a future in which less people are connected to the Internet and using mobile data? I didn’t think so. That also means we’re unlikely to see a future in which Verizon isn’t paying out a big, growing dividend.
Verizon has increased its dividend for 16 consecutive years.
Not only do you get those reliable, consistent dividend increases to look forward to, but you also get a big dividend here. The stock yields an appealing 4.7%. Compared to the market, that’s very juicy. Actually, compared to the usual yield for Verizon stock, it’s juicy – the five-year average yield for this stock is 4.2%. Like the other stocks listed, this is more of an income play than a compounder – the 10-year DGR is just 2.6%. But if you want a big, safe dividend that allows you to keep up with inflation over the long run, this gets you there. Speaking of safe, the dividend is covered by a rather low payout ratio of 48.3%, based on midpoint adjusted EPS guidance for this fiscal year.
This stock is down nearly 10% on the year, and it looks undervalued.
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.
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