How to exponentially grow your dividend share portfolio

February 1, 2013

I have been asked to explain how you can grow your dividend share portfolio fast with little effort.

Not many people know that you can massively increase the dividends you pocket every year by using just two simple investment strategies. In fact there is almost no limit to how much money you could accumulate using these strategies. In particular if you shelter your dividend paying shares in a stocks and shares ISA.

The best thing is, that once you own some high quality dividend paying shares, you can set the ‘system’ on auto-pilot and your online stockbroker will do it all for you.

Sounds ideal to me.

So, what am I talking about and why are not more people aware of this?

To grow your dividend share portfolio fast with little effort what will happen is that you just automatically ‘multiply’ the number of the high quality dividend paying shares you already own without spending more money.

Step 1 – create a portfolio of high quality dividend paying shares

The first thing you need to know is that unfortunately only a relatively small number of companies are “eligible” to grow your dividend share portfolio exponentially. In fact, only companies with lots of cash and a good track record of paying dividends will enable you to do this.

Also, for the best results it is important that the shares from high quality dividend paying companies are bought when they are priced ‘right’ i.e. when they are undervalued. Many people find it difficult to ascertain when shares are undervalued and overvalued.

The last few years we have developed our unique screening strategy specifically to find these types of shares. Unsurprisingly, with the stock market at these levels only very few companies make it. But those that do often go on to pay monumental dividends.

Step 2 – use a pound-cost averaging strategy

Pound cost averaging puts your investments on auto-pilot. It basically refers to the principle of investing an amount of money in equal amounts and at regular intervals.

Rather than randomly buying shares, pound-cost averaging get you started building a portfolio of dividend paying shares in a structured way.

Using the example of UK’s dividend champion British American Tobacco, I explain how to do all this in more detail in an article you can access Here.

Step 3 – reinvest your dividends

As soon as own shares in high quality dividend paying companies you will begin to receive regular cash dividends from those companies.

The ‘trick’ now is not to cash-in your dividends. Instead you use these dividends to invest in the same companies you already own, and presto you start to ‘exponentially’ grow the number of shares you own, without you adding any new money.

This little ‘trick’ of reinvesting your dividends allows you for your dividend share portfolio to grow over time leading to ever bigger dividend payments.

Again using the example of British American Tobacco, I explain how to do all this in more detail in an article you can access Here

Double, even triple, your dividend yields

Say you bought shares with a divided yield of 4 percent. Over time, your dividend yield, on your initial shareholding, will start increasing slowly. In fact, every time a new dividend payout is reinvested in the same companies.

As a result, you can end up with double or even triple your initial yields if you have enough time. The longer you can do this the bigger the benefits will be once you start drawing an income.

In conclusion

As you benefit from a combination of steadily increasing dividend pay-outs and dividend re-investment you will see your dividend share portfolio grow exponentially. Once you start needing the income you simply ‘switch-off’ the dividend re-investing ‘button’ and enjoy your dividend income from a much larger share portfolio than you otherwise would have owned without having added any new cash.

Of course, when you embark on a dividend re-investment strategy you need to know which companies to use, and, also, once you have decided on the companies when to start buying them. At that stage, you need to ask yourself the important question . . .

Are dividend paying companies currently historically undervalued?

Buying dividend paying shares when they are priced too high will often lead to long-term disappointing returns.

Our unique share valuation service provides you with information the share prices at which many dividend paying companies are historically undervalued and overvalued. Our proprietary financial strength database provides you with information whether these companies can sustain and increase their dividend payments.

Find out whether any of the companies mentioned above are currently historically undervalued, overvalued or trading somewhere in-between’.

Maximise your long-term returns: Enter and exit the stock market at the right time while receiving increasing dividends from companies that have been paying dividends for decades and are financially strong.

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