How to Start Dividend Investing 105: Your First 5 Dividend Stocks

Venturing into the unknown can be difficult, especially if money is involved. I always beat the drum of dividend investing; however, most people are too intimidated to take the first step. Today, we are going to solve this analysis paralysis. 

Welcome back to the How to Start Dividend Investing series (101, 102, 103, 104), where we prepare ourselves to invest in the markets. Now, let’s dive into picking your first set of dividend growth stocks. 

My simple rule. My simple rule is to choose five stocks to get started. These stocks fall into the following categories:

1. Index fund.
2. Monthly-paying stock.
3. Stock that pays in January.
4. Stock that pays in February.
5. Stock that pays in March.

Using this simple picking technique, you can pick your stocks and become an investor. We will stick to blue-chip dividend-paying stocks since this is a dividend growth portfolio. Now, let’s break down each of these categories, followed by some examples. 

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Index Funds. I have written a lot about index funds recently because they are the easiest way to become wealthy over time. I always keep index funds in my dividend growth and income portfolios because they add speed to an otherwise slow process. 

My four favorite index funds are Vanguard Total Stock Market (VTI), Invesco Nasdaq 100 (QQQ), SPDR S&P 500 (SPY), and SPDR Dow Jones Industrial Index (DIA).

You can choose any one of these index funds and do exceptionally well. I mainly stick to VTI because I absolutely adore it. VTI is always my go-to index fund, followed by DIA. 

Once you pick your index fund, you can choose your target allocation percentage. It’s easy to choose 20% (1 out of 5). Or choose 10%, and leave 90% for the other four positions—providing you with more income. 

Monthly-paying stocks. It’s good to have a monthly-paying stock because it motivates you to invest. Most stocks pay quarterly, so having a consistent monthly payer can give you that boost every month to keep investing.

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My favorite monthly-paying stock is AGNC, a mortgage Real Estate Investment Trust. AGNC does not buy homes; it makes loans to homebuyers and builders. Since it is a borrowing and lending game, its price fluctuates with interest rates.

I don’t recommend AGNC to most people because its value doesn’t travel in a straight line. However, another monthly-paying blue-chip stock is Realty Income Corporation (O). O is also a REIT, but it owns properties. 

You may want to expand your pool of monthly payers by investing in dividend ETFs. These ETFs will provide the yield and security you seek. Some ETFs I invest in are Wisdom Tree Dividend (DHS) and SPDR High Yield Bonds (JNK).

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Quarterly-paying blue-chips. Finally, it’s time to add a quarterly-paying blue-chip stock for each of the following groups. January (Jan, Apr, Jul, Oct), February (Feb, May, Aug, Nov), March (Mar, Jun, Sep, Dec). I have a complete list of my favorite blue chips in this article. 

Since I am a nice guy, I will list some recommendations below. This will give you an idea of what’s out there for each quarter. There are many more stocks out there, so have fun

1. January: Phillip Morris (PM), Altria (MO), Annaly Capital (NLY), Iron Mountain (IRM)
2. February: AT&T (T), Verizon (VZ), Procter & Gamble (PG), Medical Properties (MPW)
3. March: Prudential (PRU), Exxon Mobil (XOM), McDonald’s (MCD), Target (TGT)

You can attempt to diversify your portfolio by sector, but you only have five stocks. Pick your favorites, and over time you will expand your portfolio. 

Putting it all together. Now you can put your five stocks together and dollar-cost average into them weekly or monthly. I would recommend investing weekly because you will get better deals over time. 

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My wife built her Cash APP dividend portfolio starting with $500. She put $100 in each VTI, AGNC, PM, VZ, and PRU. Now, she has close to $10,000 in her portfolio, and her dividends are growing every month. 

As a DGI portfolio, ensure you pick the right platform for weekly and monthly contributions. The more automated you can invest, the better your chance for success. The book “I Will Teach You to Be Rich” talks about automatic investing. 

I use STASH as my favorite dividend growth portfolio. I invest $2/week into each of my positions. I am just slowly dollar-cost averaging into a small fortune. Here is a picture from my dividend spreadsheet.

I love watching my dividend payments grow slowly. That’s the magic of a dividend growth portfolio, that slow burn. The opposite is income investing, where you invest for current income.

What to expect. When you first start dividend investing, don’t expect much income. The results will be slow, and you may lose motivation. You build a DGI portfolio for future revenue and growth. That would be amazing if you could invest $100/mo into your portfolio. 

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Never compare your portfolio against someone else’s. If you stick to the routine, you will see gains that you cannot even fathom. This is the power of compounding. 

Conclusion. Hopefully, I gave you a small window into building your first portfolio. I built every one of my five portfolios using this method. You can add more positions as you read more, but this is a great way to see monthly results. 

Remember, you are investing for long-term health and wealth. Don’t expect to see tremendous results early in the process. It took me eight months to start earning $100/month from dividends. 

Today, my wife and I are approaching $1,000/month in dividend income. This is an enormous amount of income for just breathing. If you want to create a great passive income stream, set up your five stocks, and start automatically investing. You’ll get here sooner rather than later. 

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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.  I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing