Top Dividend Picks Using a Solid Weighting Scheme

I have written before on how important it is to have a legitimate weighting mechanism when picking stocks for a high dividend yield portfolio. It is also very important to stay disciplined with this approach when rebalancing. The notion of weighting by market capitalization is a tired one and has been shown to be inferior to better weighting schemes. My preferred variables for weighting high dividend paying stocks are the following in order of the magnitude of their weighting: Dividend Yield, (1-Debt to Equity), 1 Year Dividend Growth Rate, Payout Ratio, and the 5 Year Dividend Growth Rate. The weights I use are as follows: Factor Weights Yield 55% Debt/Equity 15% 1 yr Div Growth 15% Payout Ratio 10% 5 yr Div Growth 5% Total 100% There can be plenty of debate about what the weights should be for each of these variables. Suffice it to say that my company... Read more