The Unstoppable Power of Dividend Income
Why dividend income?
Dividend income has served investors incredibly well over the decades. Low interest rates and rising inflation often present real problems for people reliant on their savings, investments and pension pots.
Instead, dividend paying investments have been the cornerstone of sound and secure investing for over a century.
Dividends have to be paid from a company’s real earnings that are sustainable. That means companies that pay you dividends make money. They have the cash and a consistent revenue stream to do so.
Paying a regular dividend income that grows every year is traditionally seen as a measure of long-term strength and success of a company. Historically, dividend paying companies have outperformed all other asset classes over the long term.
Potential for both income and capital appreciation
When you own a dividend paying share and you reinvest those dividends, your investments begin to work for you. Your money begins to compound.
In a bear market, as share prices decline, reinvesting dividends allows you to accumulate more shares at more and more favourable prices.
Pound cost averaging – buying equal pound amounts over time – works especially well when share prices are falling. You purchase more shares reducing the overall average price per share.
And then when prices go up, your dividend paying shares become “Return Accelerators.” You get the capital appreciation of the additional shares you own — plus all the extra dividends!
Read this before buying dividend paying shares
Before you start picking dividend paying companies to put into your portfolio, let me warn you about something . . .
You can’t simply scan the financial pages looking for companies with big dividends, buying those with the highest dividend yield. Committing your money to companies with the highest possible dividend income is a high-risk strategy.
In order to maximise your income from dividend paying companies you have to understand two critical things.
You need to know about the company’s sustainability. They have to be stable. Well managed. Have a competitive advantage, a long-term plan, an economic ‘moat’. They have to be able to maintain and grow their dividend. This is a fact too often ignored by investors.
You also need to know the unique, historical and intrinsic relationship between the dividend yield and the share price of a company.
To maximise your returns, you need to know when a particular dividend paying share is undervalued and at what price they become overvalued.
Finally, once you recognise that a company is historically undervalued, you need to have the courage to buy the shares, the patience to hold them and the wisdom to sell them once the share price becomes overvalued.
Why Dividend Income Investor.com?
Dividend Income Investor.com is based on the wonderfully old-fashioned idea that one should purchase shares of high quality dividend paying companies when their dividend yields are historically high.
And . . . instead of holding these companies forever, sell the shares when their dividend yields decline to historic lows.
Dividend Income Investor.com focus is on high quality dividend paying companies that have long track records of profitability, at least 10 years of uninterrupted dividends with a consistent pattern of increasing dividends, liquidity, institutional ownership and managerial competence.
Our research shows that many high quality dividend paying shares trade between distinct high-yield (undervalue) and low-yield (overvalue) price areas showing us when to buy, sell or hold these companies according to their historically repetitive patterns of dividend yield.
At Dividend Income Investor.com our aim is to offer subscribers an independent source for timely and actionable information on when a high quality dividend paying company is historically undervalued and overvalued. Companies such as . . .
Occasionally we publish a Dividend Income Report, which include a 15 – 25 page in-depth review of a then historically undervalued company. Click Here for a Sample Issue regarding Tesco Plc.
Dividend Income Portfolio
Premium content subscribers have also access to my Dividend Income Portfolio. It is a real portfolio with real money – mine. It resides as an ISA at online stockbrokers TD Waterhouse. It’s not a “model” portfolio.
The Dividend Income Portfolio was created end January, 2011. It was fashioned from a prior portfolio that was not solely dedicated to a dividend income and dividend growth strategy. The opening amount was £76,893, including the then value of two dividend paying companies which were transferred into the portfolio. Nothing has been added since its creation except for dividends received.
While the central purpose of the Dividend Income Portfolio is to generate growing dividends and capital appreciation the portfolio aims to demonstrate to subscribers the results that can be achieved by following sound dividend and value investing principles.
I do not suggest nor recommend that anyone exactly follow my purchases or sales. Everyone should do their own research and due diligence before investing in anything. You should also consider your investment goals and objectives, which are likely to be different from mine.
The intention is, over time, that the Dividend Income Portfolio is invested in around 25 dividend paying companies, both UK listed and abroad. This will create a diversified and increasing stream of tax-free dividend income that would supplement my retirement income.
As well as the portfolio, there are lots of articles and news updates on each of the dividend paying companies, and, other, more general, content exclusively available for premium subscribers.
Subscribe to the premium content and have access to well balanced information that can help you make better informed investment decisions in order to build a successful dividend paying portfolio, secure a growing passive income, and, ultimately, maximise total returns.
Please take some time to explore our website and find out more about our unique approach but if you have any questions or would like further information, please don’t hesitate to contact me using the feedback form.
We look forward to welcoming you on your dividend investment journey.
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