The neat trick which could help turn £1,000 into £20,00
Friday, May 15, 2026
Martin Gamble
Shares and Markets Writer
This article shows how the power of reinvesting dividends can really growth wealth over the long run. While this is purely an illustrative example and nothing in investing is guaranteed it helps show the difference this investment approach can make.
While we use the example of a single company for simplicity, it is crucial that investors hold a balanced portfolio of companies to reduce the negative impact from any single investment going wrong.
Dividends play an important role in growing wealth with one study by Hartford funds showing that between 1960 and 2025, 85% of the cumulative total return of the S&P 500 can be attributed to reinvested dividends and the power of compounding.
Total return and how you can make reinvesting dividends easy
A simple way to think about total investment return is to break it down into the moving parts.
Total return is the capital gain/loss (the change in the share price) plus any dividends paid out. Some measurements of total return will assume dividends are reinvested.
It is easy to forget about reinvesting dividends because it is not always practical to invest smaller amounts of money, so make sure the cost of dealing doesn’t swallow too much of the reinvestment.
The good news is that most online investment platforms provide an automated dividend reinvestment service, known as a DRIP.
How does compounding dividends work?
Share prices can move around a lot but the key to compounding is to think about your investments as part ownership of a company and focus on the earnings and cash flow that stem from this ownership.
Growing dividend payments should be used to buy more shares, and this is the core dynamic which drives compounding.
The table shows an investment with a share price of 100p and a dividend of 5p per share equating to a 5% dividend yield. Earnings and dividends grow at 10.5% a year.
The reinvested dividends increase the share count by 5% a year.
Business growth compounds the value of each share (share prices follow profits over time) while dividend reinvestment compounds the number of shares owned.
In the example, the number of shares owned grows from 1,000 at the outset to 2,653 in year 20 and the year 20 dividend payment grows in value to close to your original investment.
A point which is often underappreciated is that wealth creation accelerates over time as the base grows.
It is like a snowball rolling down a hill, the more it rolls, the greater amount of snow it collects. A bigger snowball gathers more snow than a smaller one.
So, growth in the first five years adds just over £1,000 but the same growth rate in the last five years adds more than £10,000 to the pot.
Excluding dividends the investment pot would have only grown to £7,360 which means dividends have contributed 62% of the total return, underlining their importance.
What if dividends were put into a savings account?
As the table shows, the wealth pot created by putting dividends into a savings account is around £8,000 (£19,545 minus £11,509) less than reinvesting them into shares.
Bank deposits are safer than investing in the stock market, but the interest rate paid can often struggle to keep pace with the cost of living.
As the table shows, the wealth pot created by putting dividends into a savings account is around £8,000 (£19,545 minus £11,509) less than reinvesting them into shares.
Bank deposits are safer than investing in the stock market, but the interest rate paid can often struggle to keep pace with the cost of living.
AJ Bell will re-invest earned dividends, a regular investment, minimum of £25, in 350 shares and selected Investment Trusts. Around the tenth of the month, free of charge. You could use the investment to buyback shares you have sold at a higher price or build new positions at zero cost.
If you think owning shares is easy, you are mistaken. It’s said that ‘ Equities climb a wall of worry’.
If you had been clever/lucky enough to have built up a 100k position in LWDB over many years, from the end of February to 23 March the share fell 15%, that’s a hole in your retirement pot of 15k, in just 3 weeks. If you are using the dividend to pay your grocery bill, LWDB paid when the price was £12.00 a dividend of 3%. 3k a year, as the price fell the yield rose so income was still 3k a year.
With hindsight it was a great trading opportunity, be prepared for the next market crash.
This year’s income for the SNOWBALL will meet the current fcast. The next market crash or sideways movement is the known, when is the unknown.
To be ready to add bargain high yield shares, you need to have cash that doesn’t fall with the market, balanced out by you fail by the month and not the year. There is no way of knowing, without hindsight, the bottom of any fall, so you have to buy and be content with the yield. Two property shares in the coveted list are SUPR, see earlier research on the share and PHP.
NCYF, for it’s high yield, current yield 9% but the target is a double figure yield, which would allow the SNOWBALL to buy either MRCH, LWDB or CTY, whilst still earning a blended yield of 7%. Any future dividends could be added to this position as you wait for the price to rise and the yield to fall.
A cash equivalent position will be built with XSTR, currently, yielding around 4%, so over a one year period that would be a loss of around £400.00
Remember a current income stream is more important than some promised high yields in the future, until you near retirement, than repeatable dividends are more important than some promised high yields.
The current target for the SNOWBALL is the year 2030 figure,
has returned to our bestseller list, even as investors continue to broadly favour growth portfolios.
The trust, which has a share price dividend yield of almost 11%, moves back into the top 10, having sat just outside it last week.
The renewable energy infrastructure sector has faced plenty of curveballs in the last year though it has received greater interest on the back of conflict in the Middle East.
Greencoat UK Wind shares have certainly received a boost since mid-March and have returned around 4% so far in 2026.
The only other dedicated income fund in the list is the value-minded Artemis Global Income I Acc (B5ZX1M7), though investors are likely drawn by its continued stellar returns rather than its yield. The fund, which has a chunky allocation to emerging markets, has returned around 18% so far in 2026.
Otherwise, we see plenty of appetite for some of the classic growth funds – and some of those that have delivered especially big gains in recent weeks.
which raised a decent chunk of money in its C share issuance, retains a place in the top five, while three broad global tracker funds remain in the top 10.
This “Celebrity” Fund Launch Can Teach Us a Lot (About What Not to Buy)
Michael Foster, Investment Strategist Updated: May 14, 2026
If you ask the average investor what, say, an ETF is, you’ll likely get a good answer. A closed-end fund (CEF)? Likely a blank stare.
That’s because CEFs are a tiny corner of the market, with only about $300 billion in assets among them. ETFs? About $13.5 trillion. The scale is way out of whack here.
At CEF Insider, of course, we like it this way. It’s why “Insider” is in the service’s title.
Since CEFs are obscure, we can easily find overlooked ones trading at big discounts to net asset value (NAV, or the value of their underlying portfolios). Then there’s the income: Right now, the average CEF yields 8.7%, with many paying dividends monthly.
CEF discounts make our upside play straightforward: Buy when the discount is unusually wide, ride along (and collect our payouts!) until it narrows or flips to a premium. Then sell for a profit and move on to the next overlooked CEF.
Rinse and repeat.
CEF Obscurity Sometimes Attracts Celebrity Investors
But even though CEFs are off the radar, the odd famous investor does dip their toe in every so often. One such person is Bill Ackman.
Ackman is a value-investing maverick and multibillionaire whose public fights against corporate management teams have grabbed headlines worldwide.
He dramatically took on Herbalife (HLF) via a huge short position in 2012. He ended up on the losing end of that one, but his aggressive moves did turn Chipotle Mexican Grill (CMG) around. Similar tactics with Valeant Pharmaceuticals (VRX) and Canadian Pacific Kansas City (CP) had mixed results.
But overall, retail investors who’ve ridden along with Ackman haven’t seen great returns.
Below you can see the performance of his hedge fund, Pershing Square Holdings (PSHZF), in orange, versus an S&P 500 index fund, in purple, over the last decade. Since Pershing is based in London, we’re looking at its US-listed over-the-counter (OTC) stock here:
UK-Based Pershing Square Has Underperformed for Years …
As a result, PSH has traded at a wide discount to NAV (around 30% much of the time) for years. That’s a steeper markdown than all but the six cheapest CEFs tracked by CEF Insider.
Note that since PSH is London-based, its structure is a bit different than the CEFs we cover in CEF Insider (which is why you won’t find it on a screener like CEF Connect).
Nonetheless, let’s continue, because Ackman’s CEF efforts do hold useful lessons for us, especially since, in April, he debuted a US-listed CEF: Pershing Square USA Ltd. (PSUS). That fund fell sharply after its IPO:
… And Ackman’s US-Listed CEF Wobbled Out of the Gate, Too
While the S&P 500 (again shown through the performance of an S&P 500 index fund, in purple) has done well in the last couple of weeks, as of this writing, PSUS (in orange) has gone the other way, with a 17.7% drop in value from its IPO date.
What does this tell us? With PSUS moving from par to a roughly 12% discount in a couple weeks, the firm’s London listing clearly wasn’t the problem. It’s simply that, right now, investors don’t see Ackman as a star manager deserving premium pricing.
Moreover, PSUS has mainly marketed itself as a vehicle to invest alongside Ackman, and has not revealed its holdings. (CEFs don’t have to do so at IPO, and the fund is so young it hasn’t had time to make this disclosure.)
That makes it tough to predict where the discount will go from here, but the roughly 30% markdown PSH typically sports is a decent guide. That, along with the fact that PSUS doesn’t pay a dividend, either, makes this a fund to avoid.
The Fee Issue
Then there are PSUS’s fees, which in my mind are a bigger issue than the lack of clarity around its future moves. According to their SEC filings, PSUS’s managers will charge investors a flat 2% fee:
“The Company [i.e., PSUS itself] pays the Manager [i.e., Ackman and his team] a fee, payable quarterly in advance on the first business day of each fiscal quarter, based on the Company’s NAV on the last day of the previous fiscal quarter equal to 0.50% (or 2.0% on an annualized basis).”
Technically speaking, this is less than the average CEF, which has fees of 2.6%. However, that figure is skewed by CEFs with very high fees, like the XAI Octagon Floating Rate and Alternative Income Trust (XFLT), whose fees are more than 5% of assets.
There are plenty of solid CEFs with much lower fees, like the Adams Diversified Equity Fund (ADX), a CEF Insider holding whose fees are just 0.49% of assets.
This is also a bit of an unfair comparison because many CEFs (like XFLT) look like they charge high fees because they include the cost of leverage in their calculation. Notably, that 2% fee PSUS discloses does not include the costs on the $50 million of preferred shares it plans to issue, or the 15% to 20% leverage ratio it intends to carry over time.
That points to potentially higher fees in the future.
That isn’t necessarily a bad thing for CEFs, as strange as that sounds! A heavily discounted CEF with high fees can still outperform a low-fee CEF trading at a premium. But it also lowers PSUS’s appeal, unless and until its discount gets even wider still. Otherwise, this is a fund to avoid, despite its high-profile manager.
These 4 “Pivot Points”—Not Ackman’s Flashy CEF—Are Where We’re Going Next
The great thing about CEFs is that, despite their small market size, they give us lots of ways to tap into the fastest-growing trends out there. And they let us do so at a discount!
I’m tracking 4 CEFs that are cheap now, while kicking out a solid 10% average dividend. Plus they give us “upside two ways”:
Through their narrowing discounts: All 4 of these funds are unusually cheap, which can’t last because …
They’re dialed into the biggest shifts AI is driving today, including the automation of manufacturing, fast drug development and surging power demand.
Wall Street is starting to notice these shifts, but there’s still time to get in. And overlooked CEFs are the perfect way to do it with their way overdone discounts.
Is Wall Street’s Trash Our Treasure? 5 Outcasts Yielding up to 18.3%
Brett Owens, Chief Investment Strategist Updated: May 15, 2026
Let’s capitalize on analyst incompetence—and bank yields up to 18.3%, with upside to boot!
A widely cited academic study on analyst target price accuracy found that only about 54% of 12-month price targets correctly predicted even the direction of the subsequent price move.
Fifty-four percent. On direction alone. That’s barely better than a coin flip!
Analysts give specific price targets to stocks like they are scripture. In reality, they don’t even know if the thing is going to move up or down.
And it gets uglier. A 2024 Yale School of Management study found that analysts systematically delay downgrading stocks after bad news—to curry favor with the companies they cover. The suits aren’t just bad at predicting stock moves. They’re deliberately stalling their warnings to protect their banking relationships.
Put those two facts together and the picture is clear. Wall Street “research” is a farce. Which is exactly why it works so well as a contrarian indicator!
When Wall Street’s collective price target sits below the stock’s current price, that’s not a signal to sell. That’s a signal that full pessimism is baked in! All it takes is one decent earnings report and the stock gaps higher while the research machine scrambles to reload.
Today we’ll review five hated dividend payers with yields of 6.7% to 18.3% with the potential to rally when analysts change their tune.
Let’s start with Virtus Investment Partners (VRTS), an investment manager that provides mutual funds, exchange-traded funds (ETFs), closed-end funds (CEFs), insurance funds, separately managed accounts and more.
This is no Vanguard or Fidelity. Its $160 billion or so in assets under management (AUM) is a fraction of what the big boys handle, and most readers might not recognize the name.
But Virtus still stands out because of its structure. It’s a partnership of numerous boutique investment advisers, which means different funds under the Virtus name are often managed by different groups.
This company peaked in late 2021 amid the broader market’s roaring recovery. Since then, however, it has lost nearly 60% of its value, reflecting slowdowns on both the top and bottom lines. This year might not be any different, with the pros looking for single-digit declines in both revenues and profits.
Part of the issue has been weak performance in some of Virtus’ most important funds. But there’s also the overall nature of its products—Virtus is a predominantly actively managed (read: higher-fee) outfit in an age when most investors are looking for passive, low-fee ways to invest.
Wall Street’s not high on this stock as a result. A common thread among hated stocks is that they’re also poorly covered stocks—many analysts prefer to simply drop coverage of a company rather than irk management by telling people to sell. That’s the case with VRTS, which has just four covering analysts. One says it’s a Buy, one calls it a Hold, and the other two are Sells. For however tame that might sound, that’s an ugly split in the stock-research world.
Virtus does have a handful of contrarian appeals, though.
Shares trade for a paper-thin 5.5 times next year’s earnings estimates. The dividend has exploded by more than 400% over the past decade, and that includes a near-doubling over the past five years alone. That payout is safe, too, at less than 40% of next year’s earnings. And the company has made numerous acquisitions (such as Alphasimplex, AGI and Stone Harbor) in hopes of sparking longer-term growth.
Alexander’s (ALX) Dividend Yield: 7.6%
Alexander’s (ALX) is a REIT that operates exclusively in the greater New York City metropolitan area. It’s technically classified as an office landlord, though its properties also include retail and residential space. Vornado Realty Trust (VNO), which predominantly operates in the Big Apple (but also owns one property in each of Chicago and San Francisco), owns a 32.4% stake and also manages the company, which means ALX owes it annual management fees and occasionally development fees.
The most important thing to know about Alexander’s is just how concentrated it is. ALX has just five properties under its umbrella—and it’s about to be four. In March, the company entered an agreement to sell its Rego Park I property to Northwell Health for $202 million in net proceeds.
So, in a nutshell:
Alexander’s already-tiny real estate roster is somehow getting smaller.
Despite its small portfolio, the company still has external management expenses.
ALX earned $10.82 per share over the trailing 12 months and is expected to earn $12.08 per share across 2026, but it’s on pace to pay out almost 50% more than that ($18 per share) in dividends.
Shares trade around 19 times next year’s AFFO estimates.
The stock is down to one lone analyst who says we should Sell.
No Greatness From Alexander’s Since Its Last Dividend Hike in 2018
I pointed out Alexander’s loathed status on Wall Street back in November. Since then, it has put together a 15% gain, but it has done so by fattening an already hefty valuation.
If ALX continues to rise from here, it will be defying gravity—and sanity.
ConAgra Brands (CAG) Dividend Yield: 10.0%
Companies selling pantry and household basics are not popular right now. I recently highlighted how sector-wide pain had driven up consumer staples yields, but it’s not just shareholders who are selling—analysts think we should unload those stocks, too. Wall Street’s most-hated list includes a ton of sector names, including Kraft Heinz (KHC), Campbell’s Soup (CPB) and General Mills (GIS), the last of which I identified as a prime GLP-1 victim.
But the worst-rated of the group right now is Conagra Brands (CAG), which has gone from a reasonably high yielder to a sky-high payday for the wrong reason: a multiyear cratering in shares.
CAG Is Paying 2x Its Historical Dividend Ceiling
Conagra owns a broad portfolio of packaged food brands, including Banquet, Healthy Choice, Marie Callender’s, Vlasic, Duncan Hines, Slim Jim, Reddi-Wip, and more. It also has a foodservice business that offers more diversification than most grocery-anchored staples names.
But it has been taking blows from all sides: GLP-1 adoption. Soaring input costs. Cuts to SNAP. Encroachment by private-label brands. Its top and bottom lines have been contracting, and the pros expect more of the same over the next couple years.
Understandably, the pros don’t love it. A dozen analysts covering Conagra say investors should stay on the sidelines; two call it a Buy, and four say it’s a Sell. Consider this a “bearish Hold”; analysts overcorrect toward being bullish, which means even Holds have a negative connotation, making this a very bearish consensus.
The dividend is in doubt. The payout represents about 80% of next year’s (lower) earnings estimates, which by itself doesn’t signal an immediate threat—plenty of defensive companies can manage at that level. However, 1.) it doesn’t give CAG much room to explore M&A to reposition its portfolio, and 2.) that’s well above Conagra’s stated target ratio range of 50% to 55%.
Western Union (WU) Dividend Yield: 10.5%
Western Union (WU) was founded as a telegraph service, and its core business today is money transfers in an age of PayPal and Venmo.
It seems like such a dead company from 10,000 feet that Wall Street’s view—it has 10 Holds, just 1 Buy, and six Sells on the stock—almost seems too optimistic.
But credit where credit is due: Western Union has been scrapping hard to remain relevant.
Its “Evolve 2025” initiative is standard corporate fare: new products and improvements, as well as operational efficiencies.
However, in April 2025, it spent $77 million on foreign-exchange specialist Eurochange to further expand its “Travel Money” unit.
It made a bigger splash that summer with a $500 million acquisition of Miami-based International Money Express (IMXI), aka Intermex, which serves some 6 million customers who send money from the United States, Canada, Spain, Italy, the United Kingdom, and Germany to more than 60 countries. (The deal is expected to close in mid-2026.)
WU has also begun to lean heavily into digital assets. It very recently launched its own “USDPT” stablecoin alongside its Digital Asset Network, the latter of which will help people with partnered cryptocurrency wallets cash out across Western Union’s network of 380,000 agents. A Visa-branded prepaid USD “stable card” is expected to launch later this year, will let consumers hold value in Western Union’s USDPT and spend it globally.
The question is whether all of this will help counter the secular decline of its cash-based money-transfer business. One promising sign? Revenues are expected to improve by mid-single-digits this year and next, and while profits are expected to remain virtually flat for the fourth straight year, the pros now see a 10% bump in the bottom line for 2027.
Can Western Union Finally Stop the Long Bleed?
Prospect Capital (PSEC) Dividend Yield: 18.3%
Prospect Capital (PSEC) has a lot of headline stats that are hard to ignore. It pays more than 18% right now. It’s a monthly dividend stock, to boot. And it trades at a wild 60% discount to its net asset value (NAV), making it one of the cheapest business development companies (BDCs) on the market.
On the other hand …
4 Dividend Cuts and Barely Breakeven Returns in 12 Years
It was already a miserable history to overcome, and it got even worse of late, with Prospect Capital taking another slice out of its dividend in early May.
Wall Street is fed up. Only one analyst covers PSEC anymore, and they think we’re better off without it.
However, despite its steep losses of the past few years, PSEC is still one of the larger BDCs by both market cap ($1.2 billion) and net assets ($3 billion).
Prospect has a diverse portfolio of 89 companies across 31 industries, though I should point out that’s a couple dozen fewer investments than it had less than a year ago. The company is in the midst of trying to transform its portfolio—it has been increasing its first lien mix (72%) and reducing its second lien senior and secured loans (12.4% of the portfolio at cost). It has also fully unloaded its CLO equity portfolio and exited several real estate properties.
PSEC is also much more defensively positioned for the current market moment, with just 3% software-industry exposure versus a peer average of 23%.
These moves might eventually bear fruit, but Prospect Capital is a “show me” stock given its past, and so far, it’s not showing much. PSEC has reported year-over-year declines in quarterly net interest income across all three quarters of its current fiscal year, it’s pacing for an 8% drop in profits for the full year, and its cash payout has been cut down yet again.
Monthly Dividends of 9%+ We Can Actually Count On!
Rock-solid 2% or 3% yielders are a dime a dozen. It’s easy to pay a modest dividend without breaking the bank.
We have to be a lot more selective about sky-high payers like we discussed above. Far fewer companies can pay us 8%, 9% or more, and some of them are very dangerous dividend landmines just waiting to blow up your portfolio.
There are three SONIA‑tracking ETFs in the UK, the three main optionsare and they’re all ultra‑low‑risk cash‑equivalents designed to mirror the Sterling Overnight Index Average (SONIA).
Below is a clean, structured comparison of the three SONIA ETFs currently available:
Invesco GBP Overnight Return Swap (GONS)
Xtrackers GBP Overnight Rate Swap (XSTR)
Amundi Smart Overnight Return GBP Hedged (CSH2)
These are the only widely‑listed, liquid SONIA ETFs in the UK market today.
With markets at all time highs and with the world at war, it’s scary times to re-invest in shares.
The SNOWBALL wants to build a cash fund to re-invest when the next market crashes occurs, hopefully not too soon until the cash element has built accrued.
I am content, at the present time with the dividend stream for this financial year, so I am going to re-invest the income in a money market ETF, yielding around 4%.
Glenstone REIT PLC on Friday said it is considering an all-cash takeover of commercial property investor, Alternative Income REIT PLC.
Glenstone said it has been the largest shareholder in Alternative Income since November 2020, and holds 19.3 million shares, representing 24% of the company’s issued share capital.
