Writing a Dividend Investing Policy Statement

I believe that writing is the key to success in most endeavors. The act of writing requires you to go through the entire creative process of brainstorming ideas, researching them, evaluating them, coming to a conclusion, and then finally presenting those ideas in a persuasive manner.

When I started investing, if you could call it that, I had no policy, no meaningful direction. I could be pulled in any direction at any time because the entire market was my playground. Unfortunately that meant I was not good at anything, was overtrading, and doing the exact opposite of what was necessary for a success as an investor.

This is why when I started my dividend investing journey I wrote down an investing policy statement. In it I wrote about a problem I wanted to solve, the options to overcome those problems, and the selected solution. The selected solution had guidelines as well.

Below is my dividend investing policy statement that I presented to my wife to make sure she was on board with the plan.


Our retirement plans are in a good spot to generate a solid base level of retirement income if we retire at 55, therefore it makes financial sense to use our means to improve our current income.

Big Idea

Start to have “Too Much Money” by augmenting our current income with more dividends, interest, and distributions. i.e. Buy Income Producing Assets

Current State of Affairs

Here I listed our current state of finances

Wife 401(k): $W


  • 401(k): $X
  • SEP IRA: $Y
  • Traditional IRA: $Z

Total: $W + $X + $Y + $Z

Projection at retirement

This section covered a basic financial model of how things would be if we retired based on how things were going at the time.

  • Future Value at age 55 – X years from now
  • 8% year
  • $Yk/month contribution – this is super conservative based on our savings rate
  • Projected Value at retirement: $Z,ZZZ,ZZZ
  • Expected income generated: $AAk/year at 5% withdrawal rate

The letters are variables that you can plug in to your own model. I like this future value financial calculator to determine an estimate of how much you might have at retirement.

Income Investing

  • Buy moderate growth dividend paying stocks, REITs (Real Estate Investment Trusts), and Partnerships
    • Examples:
      • Stocks: XOM, T, ABBV, WBA, WFC
      • Partnerships: PSXP, MMP, ENB, EPD
  • Starting Capital: $XXX,XXXX
  • Target Yield (average): 6%
  • Target Annual Dividend Growth (average): 5%
  • Principal balance grows every year without new contributions because of dividend growth
  • Kids in-state college tuition can be paid through dividends

Tactical Approaches:

  • Invest in a high yield / dividend growth ETF or Closed End Fund
  • Advisor managed
  • Self-directed individual investments in individual securities

Self Directed Investments Guidelines

  • Position Sizes when fully invested:
    • No less than 15 positions
    • No more than 25 positions
    • Positions should be resized as soon as 6% is reached
  • Industry Diversification:
    • Corporate Stock: 30%
    • REIT: 50%
    • MLP: 20%
    • Avoid Airlines, Physical Retail, Mortgage REITs, and Hospitality
  • No DRIP
  • Use tax loss harvesting if applicable
  • Add Covered Call Income (Added in 2020)


This document was written before investing a dime and it has kept the dividend portfolio very focused on generating practical and usable income that improves our life. There are a lot of dividend growth investors out there, but in general their strategies are more focused on lower yielding corporate stocks. My REIT and MLP focused strategy generally yields higher levels of income and provides some fun tax advantages if you’re willing to deal with K-1s.

Do you have an investing policy statement? Any suggestions for mine? I’d love to continue the discussion here or on twitter!

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