When I started investing in dividend stocks, I was understandably cautious. I was told it was a great way to earn passive income, but I didn’t know where to start. There were so many companies to choose from – how could I know which one was reliable?

Moreover, the memories of the 2008 financial crisis were still fresh in my mind. How could I be sure I wouldn’t fall victim to another disaster?

Looking back, my only regret is that I didn’t start sooner. Sure, I made a few bad choices in the beginning, but nothing major. After several years of patience and dedication, I am finally seeing real results.

So how do you replicate this strategy?

Paving your own way

The truth is that everyone’s investing journey is unique. We all have different financial situations and market conditions change from day to day.

However, there are some tips and tricks that apply to everyone. One of them is investing through a stocks and shares ISA. This allows UK residents to invest up to £20,000 a year without paying tax on the profits.

Please note that tax treatment depends on each client’s individual situation and may change in the future. The content of this article is for informational purposes only. It is not intended to be and does not constitute any form of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

But ISA alone does not guarantee success. To boost your chances of earning steady income, you need a solid portfolio of reliable dividend payers.

Here are some ways to identify companies with a sustainable dividend policy.

Looking further

Popular FTSE100 stocks like Unilever, National Network AND Legal and general information are often regarded as some of the most reliable dividend stocks in the UK. But I’ve covered all three in detail, so today I’m looking at a lesser-known company.

As you’ll see, he’s just as impressive as some of these gigantic names and just as worthy of your consideration.

Anglo-Eastern plantations (LSE: AEP) ticks almost all the boxes when it comes to reliable dividends: a decent yield (4.2%), exceptional cash coverage (20x) and a 34-year payout history.

There is therefore almost no reason to fear a dividend cut in the miniature and medium term.

In the last financial year, it increased its dividend by as much as 58.7%, and yet it still retains 62% of its profits for current operations. It has a high net margin of 20.25% and the return on equity (ROE) is more than adequate 16.5%.

Moreover, the share price has increased by 224% over the last 10 years.

So what’s the catch?

Firstly, it is still a diminutive company with a market capitalization of just £607.7m. Secondly, it makes palm oil an ethically questionable product subject to increasingly stringent environmental regulations. Additionally, it operates primarily in Indonesia, a region prone to severe weather that can disrupt operations and decimate profits.

So while this is a great example of what to look for in a top dividend stock, it certainly isn’t without risk.

The most essential thing

When building a portfolio of dividend stocks, it is essential to find balance. A herd like AEP Plantations can be a great addition – provided some more stable defensive options are included to reduce risk.

Not for you? Okay, each person has their own risk profile. Fortunately, this is just one of many ways to make money that I have recently discovered…