Ideally you want to have stable, regular, and growing cash flow from your stock holdings.
The first step in doing that involves evaluating the timing of (mostly) quarterly dividend payments.
First, a bit of background...companies first declare the dividend. They identify the record date, which is the date by which one must be a shareholder of record in order to receive the dividend, they identify the ex-dividend date, which signifies that the market price of the stock now reflects payment of said dividend to shareholders, and they identify the payment date. It's a good idea to check whether your broker is actually crediting your account on the same day as the payment date.
Identify for each holding the payment date, and which of three quarterly cycles it belongs: Jan/Apr/Jul/Oct, Feb/May/Aug/Nov, or Mar/Jun/Sep/Dec. More companies prefer that last cycle since it aligns with the end of the calendar year. But, there are still many that pay during the other two cycles.
Once you identify the holdings in each of these three groups, then compute how much in dividends is paid out in each, and then total them for each group. Ideally, you want the total in each group to be as close to equal as possible. It doesn't mean to select stocks based solely on this criteria, but it is a consideration.
The second step is to look at average QDV for each of the three groups. Why? Because if the payment stream is close, you also want the growth rate of that monthly stream to be close as well. In other words, you want the increases to be at about the same rate.
Compute a "weighted QDV value" based on the "dividend contribution" for each holding as a percentage of the total dividend contribution of each of the three groups. Ideally, you want the QDV for each of the groups to be as close as possible.
If you can achieve this balance as you build the portfolio over time, cash flow becomes much more predictable. You can then apply portfolio level QDV to predict average monthly growth in dividend payments with a higher degree of accuracy.
The ultimate benefit is that when you retire, you will have a predictable and growing income stream.
The first step in doing that involves evaluating the timing of (mostly) quarterly dividend payments.
First, a bit of background...companies first declare the dividend. They identify the record date, which is the date by which one must be a shareholder of record in order to receive the dividend, they identify the ex-dividend date, which signifies that the market price of the stock now reflects payment of said dividend to shareholders, and they identify the payment date. It's a good idea to check whether your broker is actually crediting your account on the same day as the payment date.
Identify for each holding the payment date, and which of three quarterly cycles it belongs: Jan/Apr/Jul/Oct, Feb/May/Aug/Nov, or Mar/Jun/Sep/Dec. More companies prefer that last cycle since it aligns with the end of the calendar year. But, there are still many that pay during the other two cycles.
Once you identify the holdings in each of these three groups, then compute how much in dividends is paid out in each, and then total them for each group. Ideally, you want the total in each group to be as close to equal as possible. It doesn't mean to select stocks based solely on this criteria, but it is a consideration.
The second step is to look at average QDV for each of the three groups. Why? Because if the payment stream is close, you also want the growth rate of that monthly stream to be close as well. In other words, you want the increases to be at about the same rate.
Compute a "weighted QDV value" based on the "dividend contribution" for each holding as a percentage of the total dividend contribution of each of the three groups. Ideally, you want the QDV for each of the groups to be as close as possible.
If you can achieve this balance as you build the portfolio over time, cash flow becomes much more predictable. You can then apply portfolio level QDV to predict average monthly growth in dividend payments with a higher degree of accuracy.
The ultimate benefit is that when you retire, you will have a predictable and growing income stream.
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