I’m learning more on how to properly invest in dividend stocks and I’ve come to realize that my dividend portfolio is heavily weighted on a particular sector.
I decided to start introducing new dividend stocks to my portfolio so that in the event that this sector experiences downtrends, my portfolio can keep on growing and experiencing gains.
My portfolio right now is experiencing some decent gains of around $700+, or a 10%+ gain. I investigated what stocks were influencing this growth and found that all these stocks were in the REIT sector.
REITs are experiencing great gains right now because investors are seeking yields and to protect themselves from inflation. And because of that REITs have become a little expensive as of the moment.
So, I started thinking about what would happen if my portfolio wasn’t experiencing this. What if REITs start to normalize and I don’t see gains from this sector anymore?
To fix that, I decided to buy extra dividend stocks from other sectors. I have been eyeing these two dividend stocks for a while now because other investors are also invested in them. So let’s take a look at these two dividend stocks!
Enterprise Products Partners LP (EPD)
EPD, or Enterprise Products Partners LP, is an energy stock that operates as a holding company, which engages in the production and trade of natural gas and petrochemicals.
Since their IPO in 1998, they have increased their asset base from $715 million to $64 billion as of December 31, 2020, through organic growth and acquisitions.
I bought this stock because aside from the recommendations of many financial YouTubers, EDP actually boasts a great 7.5% dividend yield. It’s one of the highest yields from my dividend stocks, next to LFT and GNL. And currently, they have an annual payout of $1.80 per share.
They have a payout ratio of 81.44%, which is from what I’ve learned, way above the 30% to 60% range for an ideal payout ratio.
But that is because EDP is an MLP, or a Master Limited Partnership, where they are required to pass a majority of their profits to their shareholders.
They have grown their dividends for the last 22 years, and for their 5-year growth rate, it’s sitting at 2.92%.
So, as you can see, EDP is one of those stocks that people really hold for a long time because of their great history paying dividends to their shareholders.
Their historical performance can tell you how well they have managed their business, and you can make a better decision when investing.
Lastly, EDP is a quarterly dividend stock. Although I try my best to create a monthly portfolio, you get to a point where the monthly dividend stocks simply just won’t work because they’re not good companies.
Since they payout quarterly, you can expect to get their dividends every February, May, August and November.
I currently own 3 shares of EDP, with an average cost of $23.86. But when I first bought it, I bought a fractional share of it. Then, I completed the full share on another purchase.
I wanted to try out WeBull’s new fractional share feature, and it worked out well since I didn’t have enough funds back then. I’m looking forward to adding more to this position so that I can rebalance my allocations, which I haven’t decided yet on how I’m going to do that.
But anyway, here’s the second dividend stock I bought.
Main Street Capital (MAIN)
Main Street Capital, or MAIN, is a very popular dividend stock among dividend investors as well. They’re a Business Development Company, or BDC, which, similar to MLPs, passes most of their profits to their shareholders.
They basically loan money to small- and medium-sized companies in order to finance their business. They make money on the interest from these loans and a portion of those profits are distributed to us shareholders.
They yield a nice 5.85% with an annual payout of $2.46. They have a high payout ratio though of 105.43%, which to some investors, is a red flag. Having a payout ratio above 100% means that the company is paying out more in dividends than its earnings.
MAIN has a 2.68% 5-year growth rate, and have grown their dividends since 2007, and have given special dividends throughout the year. They have been paying $0.205 per share since 2019 and has not grown it since.
I don’t understand why in Seeking Alpha they considered MAIN has cut their dividends in 2019. But upon closer inspection, you’ll notice that on December 2019, MAIN gave a special dividend of $0.24 per share. But on the next month, January 2020, it went back to $0.205. This is why you’ll see 0 here in Seeking Alpha.
One thing you have to love about MAIN is that it’s a monthly dividend stock, so you can re-invest those dividends back to your portfolio more frequently.
Currently, I only own 0.65 share for MAIN, since I didn’t have enough funds left after buying more of EDP. I bought my fractional share at $41.44, and you can expect from me to just add more to this position in the future.
Conclusion
So those are the two dividend stocks I added to my portfolio with an aim to start diversifying my portfolio. I want to not rely so much on REITs and expose my portfolio to different sectors in the future.
I’m looking at Shaw Communications as another stock that I’m going to add to my portfolio, so I can be exposed to another stock in the communications sector. As for other sectors, I’m open to suggestions and stock picks as well.