My colleague David Kuo loves getting paid a dividend.
He likes dividends so much that he has professed never to buy a stock that does not pay a dividend.
By doing so, he steadily builds up his passive income stream and enjoys higher levels of dividends as time goes by.
You can do so, too.
By focusing your attention on dividend-paying stocks and slowly accumulating them, you can also generate an enviable and growing stream of passive income.
Gunning for a high yield?
But which stocks should you buy to enjoy reliable dividends?
A natural choice may be to look at stocks sporting high dividend yields (i.e. double-digit yields) as these offer better bang for your buck.
The problem with such stocks is the high dividend yield may mask underlying problems in the business.
Even worse, the business may also be on the verge of slashing its dividends.
Hence, it is better to go for companies that pay decent yields of between 5% to 6% as long as you can ascertain that these yields are sustainable.
Blue-chip REITs such as CapitaLand Integrated Commercial Trust (SGX: C38U) and CapitaLand Ascendas REIT (SGX: A17U) offer distribution yields of 5.6% and 5.8%, respectively.
If you are looking for more growth, Hongkong Land (SGX: H78) may be suitable as the property giant has undertaken a strategic review and is committed to double its dividend in a decade.
However, its dividend yield is also lower at 5%.
Hence, it seems you have to choose between a high dividend or dividend growth.
If you want to enjoy a sustainable, safe dividend, such stocks usually sport dividend yields in the range of between 5% to 6%.
There is a way, though, to obtain a dependable double-digit dividend yield.
What you need is a bit of effort and a lot of patience.
A rush of blood to the head
The secret to getting a double-digit dividend yield is to stay vested in a stock that has a proven record of increasing its dividends.
As the years go by, the yield of your cost price should also steadily rise.
A great example is DBS Group (SGX: D05).
Singapore’s largest bank recently reported its full-year 2024 results and announced a blowout set of earnings with net profit hitting a new record of S$11.4 billion.
The bank upped its quarterly dividend to S$0.60 per share, a S$0.06 increase from its previous quarter and a 22.4% year-on-year jump from the S$0.49 paid out in last year’s fourth quarter.
What’s more, the blue-chip lender also introduced a capital return dividend of S$0.15 per share per quarter to be paid throughout 2025.
Together with the S$0.60 per quarter of ordinary dividends, the total dividend per quarter for 2025 is now S$0.75 per share.
The amazing thing is that DBS was paying just S$0.33 per quarter in dividends back in the first quarter of 2022.
In just three years, DBS managed to more than double its quarterly dividend!
When I started accumulating shares in the bank, it was during the COVID-19 period and I subsequently added more thereafter in 2022, 2023, and 2024.
My average cost ended up at S$22.14, thereby giving me a yield on cost of 13.6% based on an annual dividend per share of S$3.
Note that during 2022 when DBS’s dividend was still S$0.33 per quarter, my dividend was only 6%, in line with the majority of REITs.
By holding on to DBS’s shares over the years, I’ve managed to increase my dividend yield on cost to double-digit levels.
Get Smart: A portfolio of dividend stocks.
The above is just one example of how you, too, can eventually enjoy a double-digit dividend yield.
You just need some effort in sifting out the right stocks to buy and own for the long term.
After you buy them, you have to sit tight and be patient as these businesses grow their profits, free cash flows, and dividends.
As the years go by, you can be in the same enviable position and see your dividend yield on cost increase to double-digits.
David has curated several portfolios of attractive dividend stocks that you can choose from to build your dividend-paying portfolio.
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Disclosure: Royston Yang owns shares of DBS Group.