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Here’s how I would build a $100,000 ASX dividend-growth portfolio

Building a high-yield dividend portfolio typically takes a lot of time. Many ASX companies pay a decent dividend (and you can get some great starting yields today with a stock like Commonwealth Bank of Australia (ASX: CBA)). But companies that increase their dividends regularly are the real way to cement a high-yielding portfolio. As they say, it’s all about yield-on-cost.

So here’s how I would allocate a $100,000 lump sum into dividend-payers today for a high yield tomorrow.

Vanguard Australian Shares Index ETF (ASX: VAS) – $30,000

When it comes to dividend growth, you can’t really beat the whole market. That’s why I’m happy with a big chunk of the portfolio in an ASX-wide exchange traded fund (ETF) like VAS. With the top 300 Aussie companies, you can’t really go wrong (especially considering Australia is the only advanced country to avoid recession for nearly three decades). Aussie companies pay some of the biggest dividends in the world (partly thanks to our ‘franking credits’ system), so why not get a slice of the biggest 300, with a 3.9% yield to boot.

Macquarie Group Ltd (ASX: MQG) – $30,000

Rather than going for a ‘Big Four’ bank, I’ve chosen Macquarie because it hasn’t had a stagnant dividend for the last five years. Macquarie is one of those rare stocks you can buy for growth and income, but with a yield of 4.5% on current prices, it’s one I’m looking at locking in as soon as possible.

REA Group Ltd (ASX: REA) – $30,000

REA is your classic ‘dividend-growth’ stock, with the REA dividend growing from 10 cents per share back in 2009 to the $1.17 payout investors got on the 2019 financial year. This online advertising juggernaut has come to absolutely dominate the property classifieds that we Australians are so obsessed with – proved by REA increasing earnings before interest, tax, depreciation and amortisation (EBITDA) by a 20% compounded growth rate over the last five years. This is one I’m more than happy to hold for dividends down the road.

Appen Ltd (ASX: APX) – $10,000

Appen is a bit more of a speculative play, so it only gets a 10% cut of our lump sum, but I think this WAAAX stock has the potential to be a dividend machine one day. It is still a rapidly growing company with a small payout (0.32% on current prices), but if Appen continues to dominate the dataset industry, I’m confident there will be a lot more cash to shower on investors in a few years.

Foolish Takeaway

All of these investments have what it takes (in my opinion) to be dividend heavyweights in ones’ portfolio. I think an index ETF like VAS is a good backbone for any dividend portfolio, but Macquarie is also a favourite on current prices.

For some more dividend ideas, check out these Foolish favourites!

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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