Dividend Stock Rules of Investing

It is important to have rules for investing.  While these are based on our goals, your goals are probably different.  As such, you need to have rules that fit your objectives.  These are our current Dividend Stock Rules of Investing.

Stock Types

  1. Only Purchase US stocks: This is because we want we want our passive income in US dollars.  We do not want to be worried about exchange rates when getting paid.  In addition, we will not have to worry about foreign taxes.
  2. No LP, MLP, Partnerships, Limited Partnerships, Non-REIT Trust, etc.: We have read that when these types of stocks pay out their dividends, they require a K1 tax form.  We want to keep our tax filing simple.  There is plenty of stocks to invest in without worrying about how to file these taxes.
  3. They have to Pay a Dividend: We are investing for passive income from dividends.  While non-dividend stocks can be a good investment, they are not the type we are looking for.
  4. Companies that are Likely to Last: We are buying companies with the objective of not selling them.  While we may need to sell bad apples from time to time, we are not investing here to trade.


  1. Frequency of Buys: We only want to buy a certain stock at most once every 2 weeks. This will help keep us level-headed.  That way, if our analysis missed something on a stock, we do not invest too much money in a stock that is crashing.  This will give us 2 weeks to figure out if we really want to invest more.
  2. Sectors: Right now, we have broken the stock market into 13 sectors, such as REITs, Banking, etc. We will not buy more shares in sectors that are worth more than 20% of our portfolio.
  3. Stocks: We own a number of company stocks. We will not buy more shares when the company is worth more than 5% of our account
  4. Dividend Expiration date: We will not buy stocks based on dividend expiration date. We are looking at getting good prices on great companies.  We would rather buy at a good price instead of getting 1 more dividend check.  Also, we will worry about uneven monthly dividend payments in the future.
  5. Dividend Types: We want a variety of dividend types. Some are high now and slow-growing. Some are low but with fast growth. Some pay a random dividend amount based on some profit sharing rules.  We believe each of these can have a place.


  1. Not to: We do not want to sell. Hopefully we do good enough buying that we do not have to sell.  We will sell when we need to though.  So this is more like a hopeful guideline.
  2. Dividend Cut: If there is a dividend cut, we will take that on a case by case basis.
  3. Unbalanced Portfolio: We do not plan on selling if our portfolio becomes unbalanced. We plan on just not buying more of those companies until the portfolio becomes balanced.  However, it may be considered if it gets to way to out of whack.

Great Start to our Dividend Stock Rules of Investing

Since we are still learning, we are sure we will add and improve the rules.  Now a lot of people will put in rules that place a limit on PE ratio, dividend yield, P/S ratio, and many others.  However, we do not want to limit ourselves.  At least not at this point.  Different sectors have different “normal” ratios.

Follow our journey and Read our Recent Dividend Stock Trades.