Some ideas on dividend investing

As a dividend investor (at least mostly :x), although I hear of successful bloggers in Singapore who focused on dividend investing (you all know who you are :P), I always wondered if there was anyone in the US doing it (hopefully on a more professional scale).

I stumbled upon an idea called:

Dogs of Dow Strategy 

Credits to Dogs of the Dow

Dogs of the Dow (links here and here) is a simple investing strategy popularised by Michael Higgins (from "Beating the Dow"). It looks to hold 10 equally weighted stocks in the Dow Jones Industrial Average (DJIA) with the highest dividend yield, then reshuffles every year to include the 10 highest yielding stocks. (Probably buying and selling based on over- and undervalued stocks, as these stocks might be cyclical)

A simple long term strategy. DIJA contains large and stable companies generally, and thus would be rather safe for a passive investor. :)

Researching further, I found a similar and newer strategy and in fact, it is an index (with an ETF too!), known as:

S&P500 Dividend Aristocrats 

Credits: Street Authority

The S&P500 Dividend Aristocrat measures large cap, blue chips in the S&P500 that pays as well as increasing their dividends for at least 25 years.
It is not a pure yield index, it involves equities that has both capital growth as well as dividend income.
The index is equally weightaged (to gauge the performance of the index and treat each component as distinct investment opportunities without regard for size) and rebalanced every quarter.
It is also diversified across sectors instead of just being focused purely on high dividend yields (which are usually financials or utilities).

I think I'll start with explaining the selection criteria with the S&P500 before explaining the selection criteria of the Dividend Aristocrats.

1. Only U.S. companies can be included. 
2. Adequate liquidity with reasonable stock price. 
3. Market capitalization of $5 billion and above. 
4. Financial viability, typically measured as four consecutive quarters of positive reported GAAP earnings.
5. Public float of at least 50%. 
6. IPOs can only be considered 6 to 12 months after their launch. 
7. Company must not be a closed-end fund, holding company, partnership, investment vehicle or royalty trust. REITs and BDCs are eligible for inclusion. 
8. Sector balance for the index must be maintained after inclusion of the company. 

Now, for the Aristocrats:

1. Must be a member of S&P500 
2. Have increases dividends every year for at least 25 consecutive years. 
3. Meet minimum float-adjusted market capitalisation (US$3 billion) and average daily traded value of at least US$5 million. 
4. Minimum number of stocks is 40.
5. Each sector can only make up a maximum of 30% of the index to maintain diversification.

So how about applying it here in Singapore? Our STI only has 30 components.

My rough idea now is something like:

1. Market cap of at least SGD$1 billion
2. Stable or increasing dividends for the past 10 years (we don't have that long of a history for most).
3. Only stocks listed in SGX mainboard can be included
4. Decent liquidity and average trading volume
5. Strong businesses with good moats
6. Significant public float (I haven't managed to quantify this yet)
7. Minimum number of stocks is 15 (not sure good enough? or 25? or even 30?)
8. Each sector can make up a maximum of 30% for diversification
9. Rebalanced every year or quarter (but somehow giving up opportunities is meh)
10. No IPOs until 1 year after launch.

What do you guys think? What else do you think should be included?

Also, another local blogger did some stuff similar to Dogs of the Dow too! You can read his here.