9 Wonderful Businesses Just Joined My 30-Stock Dividend Universe (and 1 Got Cut)
The seven rules behind every pick, and the Dividend King that failed them.
For the past few months, our universe has held steady at 22 names. This month it grows to 30, and the process of getting there taught me more about my own investing than I expected.
In today’s post, we will discuss:
The difference between a universe and a portfolio
The seven rules we use to filter for the best dividend stocks
Popular dividend stocks that failed the test (some may surprise you)
The nine companies joining the universe
The one company leaving, and why
Okay, let’s dive in.
A universe is a promise, a portfolio is a bet
Quick refresher for newer readers.
The Dividend School universe is the full list of companies I follow, value, and track with buy-below prices. The portfolio is the subset I own and buy. A company can sit in the universe for years as a HOLD, waiting for the price to come to us.
Expanding the universe means more shopping aisles and zero obligation to buy anything.
The seven rules we use to filter for the best dividend stocks
Every name in the universe has to clear the same bar. Here’s the honest part: I applied these rules for years before I ever wrote them down.
So when I decided to expand from 22 to 30, I did the exercise properly. I laid out all 22 holdings and asked one question: what do these companies have in common? Seven rules fell out, and they’re the same seven I use to filter every new candidate today.
1: Toll-road revenue
Fifteen of the 22 earn fees on other people’s activity. Visa and Mastercard clip payment volumes. S&P Global and Moody’s charge for ratings. Domino’s and McDonald’s collect franchise royalties. VICI and Realty Income collect triple-net rent where the tenant pays the expenses.
2: High returns on capital
The compounders and dividend growers all earn well above their cost of capital, most north of a 20% return on invested capital (ROIC). The income names substitute contracted or regulated cash flows for raw ROIC.
3: Oligopoly economics
Two or three player industries with rational pricing. We own two of the three ratings agencies and all three payment networks. That’s on purpose.
4: The yield barbell
Nineteen names yield between 0.7% and 3.3% and grow their dividends fast. Three names (VICI, Realty Income, Brookfield Asset Management) anchor the income side. Even the anchors are contract-secured. Nothing in the universe is owned for yield alone.
5: Safety before yield
Twenty of 22 carry a SAFE or VERY SAFE score. The safety score is a gate, never a tiebreaker.
6: A buy-below price on everything
Quality is never bought at any price. Moody’s, Microsoft, and Fastenal have all sat in the HOLD penalty box for trading well above their buy-below marks.
7: No price-takers
Zero energy producers, zero materials, zero classic consumer staples. If a company’s revenue depends on a price it doesn’t set, it doesn’t get in.
Write your rules down. It’s the cheapest portfolio insurance you’ll ever buy.
The stress test: popular names that failed
Before adding anything, I ran the names other dividend writers love through the seven rules. Some heavyweights didn’t make it.
Chevron (CVX) & Exxon (XOM) ✕
Commodity price-takers. Great income stocks for someone else’s framework. They fail Rules 1, 2, 3, and 7 by design.
Merck (MRK) ✕
Keytruda drives roughly 40% of pharma revenue and loses US exclusivity in late 2028. A single-product cliff is the opposite of a toll road.
AbbVie (ABBV) ✕
A fine company trading above the average analyst target after a big run, with dividend growth slowing toward 6%. Fails the valuation gate.
Texas Instruments (TXN) ✕
A 22-year raise streak, but the fab construction cycle has pushed the payout above free cash flow. Wrong moment, worth revisiting.
Becton Dickinson (BDX) ✕
54 straight years of increases and a 7.6% ROIC. Longevity without economics.
That last one stung a little. A Dividend King failed my test.
The lesson: a long dividend streak tells you about the past. Returns on capital tell you about the future.
The framework is free. The nine names, their buy-below prices, the one I'm selling, and the risk I'm taking on are for paid subscribers. See you on the other side.