I Just Bought this High-Rated Stock for my Dividend Growth Portfolio to Boost my Passive Income

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In my Dividend Growth Portfolio (https://dailytradealert.com/dave-van-knapps-dividend-growth-portfolio/), I reinvest dividends every month using dividends that have accumulated since the previous month’s purchase. Sometimes I buy more of a stock that I already own, while other times I start an all-new position.

In the month since my February reinvestment, the dividend kitty has grown to $426. So on Monday, March 15, I went shopping.

I decided to add more shares of PNW to my portfolio. Is this the best stock to buy now? I like the stock a lot. In fact, I am adding PNW this month not only to my public portfolio, but also to my wife’s and my personal dividend-growth portfolio.

In my Quality Snapshot system, PNW is tied for the highest-rated utility with 22 out of a possible 25 points.

One reason that PNW scores so well is its A- credit rating from S&P, which is high for a utility. Utilities are usually debt-laden and in capital-intensive businesses, and they often sport lower (i.e., higher-risk) credit ratings.

Valuation-wise, without getting into all the details, I calculate a fair price for PNW of almost exactly its current price. So for a high-quality stock like PNW, that’s a reasonable deal. At its current price, PNW has a nice yield of 4.2%.

The additional five shares of PNW gives me a total of 42 shares. The number of positions in the portfolio stays the same at 28.

The portfolio’s dividend flow increased by $16 in passive income per year, or about 0.3%.

My Dividend Experiment: I say the following with every reinvestment: I know that increase sounds small, but look at it this way: If I make 12 reinvestments per year, and they each add between 0.2% and 0.3% to the DGP’s income, that amounts to a 3% increase in income without doing a thing other than reinvesting the dividends.

In other words, if every company in the portfolio froze its dividend, and I would still get 3% more income over the coming 12 months.

But of course, all the rest will not freeze their dividends. Eleven companies in the portfolio have already raised their payouts for 2021, and most of the remainder will also declare increases.

The increase in your income from reinvesting is on top of the increases the companies themselves make.

If PNW follows its usual schedule, it will declare 2021’s increase later in the year, in time for the payment to be made in December. Last year’s increase was over 6%, and that is now being paid with distributions this year.

This addition to Pinnacle West continues my heightened emphasis on company quality over the past several years.

PNW is a high-quality company, and its high dividend safety score increases by a little the dividend safety of the whole portfolio. This graphic from Simply Safe Dividends underscores the portfolio’s overall dividend safety:

The purchase is also an example of opportunistically investing in excellent companies at attractive prices when they are available. As the entire market is widely considered overvalued, it’s great to find a high-quality company available for a fair price. The market being the market, attractive prices come and go all the time.

That’s generally how I invest. I keep surveying the landscape for companies that fit my needs and grab them when their prices are fair or on sale. I don’t care what order I buy stocks in; I just need them to meet my requirements when I buy them.
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