Build a quality dividend portfolio in less than 5 minutes

When looking to make your first few investments, be sure to select dividend-paying businesses.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published April 22, 2014 5:00 am AEST

Quality dividend-paying companies should feature prominently in every intelligent investor's portfolio. Once you realise this simple truth it's sensible to stick to some simple rules to deliver the yield appeal.

Choose companies from among the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) for security, choose from different sectors to manage risk through diversity and choose companies with dependable histories of rising dividends. Here are five to consider.

Telstra Corporation Ltd (ASX: TLS) is a rock-solid business with growth runways through further investment in Asia and its superior network coverage at home in Australia. With an expected full-year payout of 29 cents per share it's trading on a juicy 5.65% fully franked yield.

Although energy producers are not normally considered for their dividend yields Woodside Petroleum Limited is trading on a hefty 5.6% fully franked yield based on analyst dividend-payout forecasts for 2014. Selling for $40 it's also trading 25% lower than Morningstar's fair value estimate of $50.

Westfield Group (ASX: WDC) is looking to reshape its future at the moment with a proposed corporate restructure and divestment of some its non-core shopping-centre assets around the world to concentrate on iconic stores in major cities. The group looks to have a great future and trades on a price-earnings of 16 and 4.9% dividend yield.

Insurance-giant Suncorp Group Ltd (ASX: SUN) trades on a price-earnings around 16 and based on analyst forecasts for a 76 cents per share payout for 2014, it trades on a juicy 5.92% partly franked yield.

Woolworths Limited (ASX: WOW) touched an all-time high last week as investors continue to like its earnings outlook thanks to its Big W and Masters stores supporting its juggernaut-like supermarket business. Yield is 3.7% and it's no surprise dividends are forecast to grow steadily into the future.

Foolish takeaway

Building a solid foundation of diversified dividend-paying stocks like the above allows investors the room to add a few more growth oriented stocks to their portfolio as well. However, consistent dividend payers are where investors should begin when starting to build their portfolio.

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