Dividend Income and re-investment Strategy

Hello Everyone,

I surely wanted to put this thought across to all the VP members and what better day than today’s auspicious occasion – Happy Diwali to all of you!

Recently I was looking at stabilizing my portfolio and although many may not agree with this format, however, I am sure few might be sailing in this boat already and I need your opinion if you are following this plan:

It is a simple dividend reinvestment strategy with a little twist of mine. Here is the logic:

1. I have chosen all the controversial and notorious high-dividend paying public companies (10-15 scripts) wherein I am not really looking for returns as I would continue to hold them for a very very long term.
2. The Dividend yield of these companies is one of the highest in the Industry as their motive is to just continue to run Business as Usual and give back all the profits back to Govt to invest in Economy
3. To still remain diversified, I would want to select scripts from different sectors. For e.g Not buying REC & PFC both but expanding themes like Power, Metal, Oil, IT etc.
4. Shortlist 5 scripts at the lowest level of their price using moving averages and multi-year charts and invest 25% of my existing portfolio with 5% allocation in each script.
5. Whatever dividends are received, re-invest back in the script which is performing poorly since my buy price out of these 5 companies. Essentially not to re-invest in the same script from where the dividend is received but the weakest of the 5.
6. Continue to accumulate more and more for higher dividends with the increase in quantity.
7. If the script starts moving in overbought zone and all-time high region, book the profit and exit and re-invest in one of the 10-15 list of companies trading at a lower price and repeat the strategy.

I have the following list of companies at this moment

I am looking to gain insights from anyone who is already doing something similar and what is your view towards it. Remember, this is only 25% of my portfolio wherein I know that I am slowly building wealth at least better than FD rates which are again taxed at the same rate. This would be a very long-term strategy to ensure we enjoy the benefit of stock split and any positive tailwinds for the given sector.