Even the Ones Who “Did Everything Right”

In this exclusive briefing, you’ll discover:

• Why “safe” income strategies are failing right now
• How inflation, fluctuating yields and policy chaos are gutting retirement plans
• The hidden risk that quietly drains retirement accounts (and how to avoid it)
• A contrarian dividend blueprint yielding up to 14.9%—without touching your principal
• How to turn $500K into a stable income stream that could last decades

Dear Reader,

You saved. You invested. You followed the “rules.”

And yet here you are—uneasy.

Wondering if you really can afford to retire. Or stay retired.

And who could blame you?

One minute, inflation’s the threat. The next, it’s recession.

And the broader economy? It’s bloated with debt and only getting worse.

We touch new all-time highs, then the market zigzags like a drunk squirrel—making it feel impossible to plan, let alone sleep at night.

So you start looking for stability. Maybe trim a position here. Tap a bit of principal there. Just for now.

But that’s exactly how it begins.

And once you start selling shares to supplement your income, you’re on a slippery slope.

A slow-motion wealth drain most retirees don’t realize they’re in—until it’s too late.

I call it…

The Share Selling “Death Spiral”

Some financial advisors (who are not retired themselves, by the way) say that you can safely withdraw and spend, say, 4% of your retirement portfolio every year. Or whatever percentage they manipulate their spreadsheet to say.

Problem is, in reality, every few years you’re faced with a chart that looks like this.

Apple’s Dividend Was Fine – Its Stock Wasn’t

As you can see, the dividend (orange line above) is fine — growing, even — but you’re selling at a 25% loss!

In other words, you’re forced to sell more shares to supplement your income when they’re depressed.

Remember the benefits of dollar-cost averaging that built your portfolio? You bought regularly, and were able to buy more shares when prices were low?

In this case, you’re forced to sell more shares when prices are low.

When shares rebound, you need an even bigger gain just to get back to your original value.

The Only Reliable Retirement Solution

Instead of ever selling your stocks, you should instead make sure you live on dividends alone so that you never have to touch your capital.

This is easier said than done, and obviously the more money you have, the better off you are. But with yields still pretty low, even rich folks are having a tough time living off of interest today.

And you can actually live better than they can off of a (much) more modest nest egg if you know where to look for lesser-known, meaningful and secure yield.

I’m talking about annual income of 8%, 9% or even 10%+ so that you’re banking $50,000 (and potentially more) each year for every $500,000 you invest.

You and I both know an income stream like that is a very nice head start to a well-funded retirement.

And it’s totally scalable: Got more? Great!

We’ll keep building up your income stream, right along with your additional capital.

And you’ll never have to touch your nest egg capital – which means you won’t have to worry about or running out of money in retirement, or even the day-to-day ups and downs of the stock market.

The only thing you need to concern yourself with is the security of your dividends.

As long as your payouts are safe, who cares if your stock prices swing up or down on a given day?

Most investors know this is the right approach to retirement.

Problem is, they don’t know how to find 8%, and 10% yields to fund their lives.

And when they do find high yields, they’re not sure if these payouts are safe. Will the company or fund have enough cash flow to pay the dividends into the future?

And how sensitive are these payouts to the latest headline, Fed policy change or unrest on the other side of the globe?

We’ll talk specific stocks, funds and yields in a moment.

But first, a bit about myself.

My name is Brett Owens. I first started trading stocks in college, between classes at Cornell.

I graduated cum laude with an industrial engineering degree — which is actually pretty popular with Wall Street recruiters.

But I couldn’t stand the thought of grinding it out in a cubicle for 80 hours a week. So I moved to San Francisco and got into the tech scene.

A buddy and I started up two software companies that serve more than 26,000 business users.

The result was a nice chunk of change coming in … and I had to decide what to do with my money.

I had seen plenty of young “techies” come into sudden cash and burn through their windfall in a year, ending up right back where they started.

That was NOT going to be me. I already had dreams of living off my wealth one day, decades before I retired.

I got plenty of cold calls from brokers wanting to “help” me. But I knew that nobody would care as much about my money as me.

So I went out on my own and invested my startup profits in dividend-paying stocks.

I’ve been hunting down safe, stable and generous yields ever since, growing my wealth with vehicles paying me 8%, 9%, even 10%+ dividends.

Over the past 10+ years, I’ve been writing about the methods I use to generate these high levels of income.

Today I serve as chief investment strategist for Contrarian Income Report — a publication that uncovers secure, high-yielding investments for thousands of investors.

Since inception, my subscribers have enjoyed dividends 5 times (and much more!) the S&P 500 average, plus big annualized gains!

And that brings me to a crucial piece of advice…

The ONE Thing You Must Remember

If I could leave you with just one nugget of investing wisdom today, it would be to NEVER overlook the incredible wealth-building power of dividends.

Few investors realize how important these unglamorous workhorses actually are.

Here’s a perfect example…

If you put $1,000 in the dividend-paying stocks of the S&P 500 back in 1973, you would have had $96,970 by the end of 2024, or 97x your money.

But the same $1,000 in the non-dividend payers would have grown to just $8,990 — 91% less.

That’s why I’m a dividend fan.

The stock market is a fantastic wealth-building machine, but it doesn’t always go straight up!

There have been plenty of 10-year periods where the only money investors made was in dividends.

And that’s what gives us dividend investors such an edge.

When you lock in an 8%+ yield, you’re booking an income stream that’s bigger than the stock market’s long-term average return right off the bat.

Of course you can’t just buy every ticker symbol out there with a flashy yield, or you’ll get burned pretty fast.

So let’s wipe the false promises of mainstream finance from our minds and start thinking the “No Withdrawal” way…

Step 1: Forget “Buy and Hope” Investing

Most half-million-dollar stashes are piled into “America’s ticker” SPY.

The SPDR S&P 500 ETF (SPY) is the most popular symbol in the land. For many 401(K)’s, this is all there is.

And that’s sad for two reasons.

First, SPY yields just 1.1%. That’s $5,500 per year on $500K invested… poverty level stuff.

Second, consider a hypothetical year when, say, SPY fell 20%, not at all out of the question, given the multiyear run stocks have been on. Just from that alone, your $500K would be slashed to $400K.

SPY was down nearly 20% that year. That is no bueno, because that $500K would have been reduced to $400K.

The last thing we want to do is lose the money we’re getting in dividends (or more) to losses in the share price. Which is why we must protect our capital at all costs.

Step 2: Ditch 60/40, Too

The 60/40 portfolio has been exposed as senseless.

Retirees were sold a bill of goods when promised that a 60% slice of stocks and 40% of bonds would somehow be a “safe mix” that would not drop together.

Oops.

Inflation — plus an aggressive Federal Reserve, plus a (thus far) persistently steady economy — drop-kicked equities and fixed income before they went on a serious bull run in 2023, 2024 and into 2025 (with a brief interruption for the April “tariff tantrum.”)

It just goes to show that bonds are not the haven guaranteed by the 60/40 high priests. They could easily plunge just as hard (or harder) than stocks in the next economic crisis.

Just like they did in 2022 (sorry, we’re only going to spend one second on that disaster of a year). US Treasuries plunged, which resulted in the iShares 20+ Year Treasury Bond ETF (TLT) getting tagged.

Sure, it still paid its dividend. But even including payouts, the fund was down 31% — worse than the S&P 500. Ouch!

When stocks and bonds are dicey, where do we turn? To a better bet.

A strategy to retire on dividends alone that leaves that beautiful pile of cash untouched.

Step 3: Create a “No Withdrawal” Portfolio

My colleague Tom Jacobs and I literally wrote the book on a dividend-powered retirement.

In How to Retire on Dividends: Earn a Safe 8%, Leave Your Principal Intact, we outline our “no withdrawal” approach to retirement:

1. Save a bunch of money. (“Check.”)
2. Buy safe dividend stocks with big yields
3. Enjoy the income while keeping the original principal intact.

To make that nest egg last, and our working life worthwhile, we really need yields in the 7% to 10% range. We typically don’t see these stocks touted on Bloomberg or CNBC, but they are around.

Of course, there are plenty of landmines in the high-yield space. Some of these stocks are cheap for a reason. Which is why we need to be contrarian when looking for income.

We must identify why a yield is incorrectly allowed to be so high. (In other words, we need to figure out why the stock is priced so cheaply!)

As I write, the top 10 payers in my Contrarian Income Report portfolio yield about 11.4% on average.

On every million dollars invested, this dividend collection is spinning off an incredible $114,000 every single year!

And you don’t have to be a millionaire to take advantage of this strategy.

A $750k nest egg would generate $85,500 annually…

$500K could hand you $57,000…

You get the idea.

The important thing is that these yields are safe, which creates stability for the stock (and fund) prices attached to them.

We want our income, with our principal intact.

It’s really the only way to retire comfortably, without having to stare at stock tickers all day, every day.

Now, many blue-chip yields are reliable. They just need to hit the gym and bulk up a bit. Here’s how we take perfectly good, yet modest, dividends and make them into braggarts.

Step 4: Supersize Those Yields

Mastercard (MA) is a near-perfect dividend stock. Its payout is always climbing, having nearly doubled over the last five years. (MA shareholders, you can thank every business that accepts Mastercard for your “pennies on every dollar” rake.)

Tap, tap, tap. Remember cash? Me neither. Another 2020 casualty, with Mastercard making a few dimes or dollars on every plastic transaction.

The cashless trend has been in motion for years. But international growth prospects remain huge. Just a few years ago, 80%+ of transactions in Spain, Italy and even tech-savvy Japan were in cash.

We expect more dividend hikes as more cash turns to plastic. Or skips plastic entirely and goes straight to e-transfers. Mastercard and close cousin Visa (V) nab a nice piece of that action, too.

The only chink in MA’s armor? Everyone knows it is a dynamic dividend stock. So it only yields 0.6%. Investors keep bidding it higher, knowing that the next dividend raise is just around the corner.

So, the compounding of those hikes makes MA a great stock for our kids and grandkids. You and I, however, don’t have the time to wait for 0.6% to grow. And $3,000 on a $500K investment simply won’t get it done.

Let’s instead consider top-notch closed-end fund (CEF) Gabelli Dividend & Income Trust (GDV), managed by legendary value investor Mario Gabelli.

Mastercard is one of Gabelli’s largest holdings. But we income investors would prefer GDV because it boasts a healthy dividend right around 6.4%, paid monthly, nearly 13 times what Mastercard pays (and this is low in CEF-land; other funds, like the next one we’ll talk about, pay nearly double that).

And as I write this, thanks to the conservative folks who buy CEFs, we have a rare opportunity to buy Mario’s portfolio for just 88 cents on the dollar.

Yup, GDV trades at a 12% discount to its net asset value, or NAV. It’s a way to boost MA’s payout and snag a discount, too.

Where does this discount come from?

CEFs are like their mutual fund cousins, with one exception: they have fixed pools of shares, so they can (and do) trade higher and lower than their NAVs, or “fair” values (the value of their holdings minus any debt).

As contrarians, we can step in when they are temporarily out of favor, like after a pullback, when liquidity is low, and buy them at generous discounts.

GDV holds more blue-chip dividend payers alongside MA, such as American Express (AXP), Microsoft (MSFT) and JPMorgan Chase & Co. (JPM). And with GDV, we have an opportunity to purchase them at a 12% discount.

These high-quality stocks wouldn’t normally qualify for our “retire on $500K” portfolio because everyone in the world knows they are strong long-term investments.

Even though these companies are constantly raising their dividends, constant demand for their shares keeps their prices high (and current yields low). So they never meet our current-yield requirement.

GDV does. The fund pays a monthly dividend that adds up to a nice 6.4% annual yield.

Let me give you one more idea (and this is where that much larger payout comes in): the Eaton Vance Tax-Managed Global Diversified Equity (EXG) is another CEF with a similar blue-chip dividend portfolio.

But EXG generates even more income than GDV by selling covered calls on the shares it owns.

More cash flow means a bigger dividend — and EXG pays an already terrific 8.6%!

So we buy and hold EXG and GDV forever, collecting their monthly dividends merrily along the way? Not quite.

In bull markets, these funds are great. But in bear markets, they’ll chew you up.

Step 5: Protect That Principal!

My CIR readers will fondly recall the 15 months we held GDV and EXG together, collecting monthly dividends plus price gains that added up to 43% total returns.

What was happening in that period, from October 2020 until February 2022? The Federal Reserve was printing money like crazy. Not only did the Fed stoke inflation, but we also enjoyed an asset-price lift.

Starting in 2022, we had the opposite situation. The stock market was topping, and we didn’t want to fight the Fed. We sold high, and by late 2022, both funds were down sharply:

We Sold EXG and GDV Just Before They Plunged

For whatever reason, “market timing” is a taboo phrase among long-term investors. That’s a shame because it’s quite important.

By aligning our dividends with the market backdrop, we can protect our principal from bear markets.

Step 6: Start Here to Retire on $500K

So if the “tried and true” money advice — like the 60/40 portfolio and the 4% rule — has been properly exposed as broken…

Where do we go from here?

Well, imagine your portfolio in just a few days or weeks from now spinning off 8%, 9% and even double-digit dividends with the reliability of a Swiss watch… with many of my recommendations paying every single month no less!

No more worrying how much is coming in next month.

No more worrying about the Fed’s next move. Or the next inflation or jobs report.

No more worrying about outliving your nest egg.

3 passive income shares, trusts, and funds to consider !

Searching for ways to supercharge your dividends ? Royston Wild reckons these high-yield passive income shares are too good to ignore.

Posted by Royston Wild

Published 15 February

JEPQ ORIT TRIG

For me, the best way to make an abundant passive income is by buying dividend shares. Share prices continue to rally, which means dividend yields are moving in the other direction. Yet there are still stacks of terrific companies with sky-high yields to choose from.

But what about if you’re searching for double-digit dividend yields? No problem. Take the following three stocks: The Renewables Infrastructure Group (LSE:TRIG), Octopus Renewables Infrastructure Trust (LSE:ORIT), and JPMorgan Nasdaq Equity Premium Income ETF (LSE:JEPQ). Each has a forward dividend yield above 10%, and a long record of paying market-beating cash rewards.

And I’m confident they can continue delivering brilliant income streams to investors. Want to know why?

Tech titan

Exchange-traded funds (ETFs) can be a great way to source a passive income. These can hold a wide variety of assets, helping to protect shareholders from individual shocks and providing a smoother return.

The JPMorgan Nasdaq Equity Premium Income ETF — which has a 10.8% dividend yield — is one such diversified fund to consider. It holds Nasdaq 100 US tech stocks which it then sells covered calls on. When out-of-the-money call options are sold, the income is paid to investors in dividends.

It’s a more complicated way to make income from the stock market. A focus on growth shares also means the fund could drop sharply in value during economic downturns. Yet over time, the ETF has proved a great dividend generator and one I expect to keep outperforming.

Renewable energy giant

Investment trusts that focus on renewable energy are another top income source to consider. This is because interest rate pressures and worries over a slower-than-expected green transition have pushed prices lower, supercharging dividend yields.

Octopus Renewables Infrastructure Trust now carries a 10.5% forward dividend yield. Could it rebound in value soon? I think so, with further Bank of England interest rate cuts on the horizon.

There’s a lot I like about the trust from a dividend perspective. Like other electricity producers, its operations are highly defensive and provide a steady flow of cash that can be returned to shareholders. I also like its wide, Europe-wide geographic footprint — this doesn’t eliminate the threat of weather-related disruptions, but it lessens the danger as localised calm conditions have a smaller impact on total power production.

An income stock I own

The Renewables Infrastructure Group is a renewable energy stock I’ve actually bought for my portfolio. And with a 10.7% forward yield, it’s one I think investors should seriously consider.

Why did I plump for this particular operator, you ask? With more than 80 assets on its books, it has an even wider footprint to protect against isolated operational problems. These are also spread across Europe, but that’s not all — its portfolio comprises onshore and offshore wind farms, solar projects, and battery storage assets, meaning it’s also well diversified by technology.

Lower electricity prices have been a problem of late. I’m confident, though, it will remain a robust passive income generator and that it’s share price will rebound following recent weakness.

Story by Rupert Hargreaves

Why MoneyWeek likes investment trusts© Getty Images

The investment-trust structure was conceived in the mid-1800s to fill a gap in the market for a low-cost, mass-market investment vehicle. One of the first was Foreign & Colonial, founded by City of London financier Philip Rose. The entrepreneur had a revolutionary goal: to provide the “investor of moderate means the same advantages as the large capitalist”

In the 1800s, investing was largely the preserve of the wealthy, with limited options available to the smaller investor. Foreign & Colonial pooled investors’ money and invested it in a diversified portfolio, spreading risk across a basket of assets.

The closed-ended structure, which provided a stable pool of long-term capital, made these investment companies ideal vehicles for financing the expansion of the British Empire and the rapid industrialisation of the Americas. As global investment markets grew and diversified, the range of investment options available to investors with investment trusts expanded, and the range of trusts available also expanded.

Investment trusts have a fixed capital base

Investment trusts are structured as companies. They issue a set number of shares at the time of their flotation, and this forms a fixed capital base. Investors are then free to buy and sell the shares on an exchange. As the shares are freely traded and the asset base is fixed, trusts can trade at a premium or a discount to their underlying net asset value (NAV).

Open-ended vehicles, such as exchange-traded funds (ETFs), unit trusts and open-ended investment companies (Oeics) issue or eliminate excess shares at the end of each day to ensure the NAV and the share price match. This means there’s no room for a discount or premium to emerge.

This also means the capital base can shrink dramatically if the number of sellers consistently exceeds the number of buyers (and the price of shares in the fund falls). As the capital base shrinks, the vehicle has to continue selling assets to fund investment outflows. If those assets are challenging to sell, this can lead to a liquidity crunch. That’s why investment trusts tend to be the best vehicle for holding illiquid assets. They have no obligation to sell the assets, no matter how wide the discount to underlying NAV may become.

Some of the biggest trusts in illiquid sectors are the infrastructure trusts 3i Infrastructure (LSE: 3IN), Greencoat UK Wind (LSE: UKW) and the Renewables Infrastructure Group (LSE: TRIG). All of these trusts own portfolios of illiquid infrastructure assets, which generate steady inflation-linked cash flows.

Infrastructure isn’t the only asset class that lends itself well to the investment-trust structure. Trusts are ideally suited to owning portfolios of mixed assets, such as bonds, gold and stakes in hedge funds or private-equity investment funds. BH Macro (LSE: BHMU) has a position in the global macro hedge fund Brevan Howard, giving investors access to a fund that would otherwise be unavailable.

HarbourVest Global Private Equity (LSE: HVPE) is just one investment trust in the private-equity sector, offering investors exposure to this asset class via the trust structure. RIT Capital (LSE: RIT) and Caledonia (LSE: CLDN) are two examples of trusts making the most of the flexibility offered by the structure. Both are majority-owned by their founding families and own a broad portfolio of assets, from private-equity holdings to direct investments in other companies and portfolios of equities.

The structure of the investment trust also lends itself well to borrowing money. Investment trusts that specialise in acquiring illiquid assets – such as wind farms, property and infrastructure assets – can borrow against those assets to increase growth and build the asset base. These companies can also borrow to invest in equities. Borrowing money to invest in shares can be risky, but trusts can often mitigate some of the risk by issuing long-term fixed bonds.

For example, Scottish American (LSE: SAIN) issued £95 million of long-term debt between 2021 and 2022 with a blended interest rate of under 3%, maturing between 2036 and 2049. The trust, which owns a portfolio of equities, as well as property and infrastructure via other investment trusts, used the cash to reinvest into the portfolio.

The ability to borrow money is particularly helpful for the real-estate investment trust (Reit) segment of the market. Reits are a version of the typical investment trust, but with tax benefits when the majority of the portfolio is deployed into property. Companies like Supermarket Income (LSE: SUPR) and PHP (LSE: PHP) have leveraged this structure to build property portfolios designed around supermarkets and healthcare facilities, respectively.

MoneyWeek has always preferred investment trusts to open-ended funds for the above reasons – and the fact that they have historically outperformed other actively managed, open-ended funds. However, this has started to change in recent years. Investment trusts, particularly in equities, have struggled to keep up with the performance of other funds. As a result, investors have drifted away, and discounts to NAVs have risen sharply.

But there’s still a place for trusts within investors’ portfolios. Thanks to the structure of trusts, they are invaluable to build exposure to specific themes such as small caps, emerging markets, property and infrastructure. There are virtually no mass-market alternatives to the infrastructure offering, and trusts such as BH Macro, RIT and Capital Gearing (LSE: CGT) offer the sort of portfolio diversification that just can’t be found elsewhere.

The 2026 target a yield of 10%, which in year 4 of the plan is already higher than an annuity and you get to keep all your hard earned. Remember when its gone its gone.

If you had been lucky or had a diversified Snowball

My share programme has changed their format, so until I get used to the new format, let’s look back at yearly performance, where if your Snowball is both

And you have been unlucky, these are the TR returns for one year.

CT Global Mgd – CMPI – Portfolio Update

19th February 2026

CT GLOBAL MANAGED PORTFOLIO TRUST PLC

All data as at 31 January 2026

This data will be available on the Company’s website,

CT Global Managed Portfolio Trust PLC

Income Portfolio

Top Ten Equity Holdings	%
JPMorgan European Growth & Income	6.6
Murray International Trust	6.1
JPMorgan Global Growth & Income	6.1
NB Private Equity Partners	5.4
JPMorgan Global Emerging Markets Income Trust	4.7
Schroder Oriental Income Fund	4.4
STS Global Income & Growth Trust	4.3
The Law Debenture Corporation	4.2
3i Infrastructure	4.1
TwentyFour Income Fund	3.8
Total	49.7

Note: All percentages are based on Net Assets 

Net Gearing

6.6%

Research for your Snowball.

Posted on 4th October 2015 | By Phil Oakley

Updated: August 2024

If you are watching or listening to the news at the end of the day you will usually be told what happened to the stock market that day. More precisely, you will be told whether it went up or down in price.

Yet investing in shares is not just about changes in prices. When you own a share of a company you are often paid a dividend as well. Dividends can be very important. They can form a major part of any long-term savings plan and also a source of income to live on.

In this chapter, we are going to look at why dividends are important and how you can use them to build up your savings pot or as a source of income. Then we will look at some of the tools that ShareScope has to help you find some dividend paying shares that can help you meet your goals.

What are dividends?

Dividends are your share of a company’s after-tax profits paid to you during a year.

They make up part of the investment return from owning a share. However, unlike a share price that goes up but then goes down again, a dividend once it has been paid cannot be taken away from you.

What’s good about dividends is that they represent a real, tangible return on the shares that you own.

The same cannot be said for a rising share price. Share prices tend to move up and down a lot and there’s no guarantee that you will sell for a profit.

The return from earning a share

Return = Change in share price + dividends received

Investing in shares that pay chunky dividends and holding them for a long time can be a great way to build up your portfolio’s value.

That’s because the dividend from shares and the reinvestment of them is where the real money can be made from the stock market over the long haul.

Why is this?

Dividends and the magic of compound interest

I’ve never been able to find the source, but Albert Einstein was rumoured to have said that “the most powerful force in the world is compound interest”.

When it comes to investing – and dividend investing in particular – I’m inclined to agree with him.

Compound interest is essentially earning interest on the interest that you’ve already been paid. This is what tends to happen if you leave money in a savings account for a number of years.

Let’s say that you put £100 into a savings account that pays interest of 10% per year at the end of the year.

You have a choice of what to do with the interest that you receive. You can either spend all or some of it or you can reinvest it.

In the first year, you will receive £10 of interest on your £100 of savings. If you spend the interest every year, this is what happens to your interest income and savings over five years.

Year	1	2	3	4	5
Starting Amount	£100	£100	£100	£100	£100
Interest at 10%	£10	£10	£10	£10	£10
Spent	-£10	-£10	-£10	-£10	-£10
Ending Amount	£100	£100	£100	£100	£100

You receive £10 every year to spend and at the end of five years the value of your savings is still £100.

You’ve had £50 of interest income and preserved your savings pot. So your initial £100 has given you £150 of value.

But what would happen if you didn’t spend the interest and reinvested it back into the savings account at 10%? If you compound the interest you receive.

Year	1	2	3	4	5
Starting Amount	£100	£110	£121	£133.10	£146.41
Interest at 10%	£10	£11	£12.10	£13.31	£14.64
Spent	£0	£0	£0	£0	£0
Ending Amount	£110	£121	£133.10	£146.41	£161.05

Well, after five years, the value of your £100 would have grown to £161.05 and your annual interest income would have grown to £14.64.

The longer you reinvest your income the bigger the potential annual income and the value of your savings pot. This is the power of compound interest at work.

The one big caveat here is that the interest rate has stayed the same for five years.

This might be the case with a fixed term savings account or a bond, but is rarely the case for other investments. I’ll say a bit more on the effect of changing interest rates a little later on.

You can use this strategy of compounding to very good effect with dividend paying shares.

Instead of spending the dividend you receive, you use it to buy more shares in the company which paid you, which in turn gives you more dividends in the years ahead.

Repeat this process for long enough – the longer the better – and it is possible to turn a small initial sum of money into a large one. This can be the case even if dividends per share or the share price do not change.

Let me show you how this can work.

Let’s say that you buy 1000 shares in a company called Bob’s Book Stores plc at 100p per share (so an investment of £1,000) when it is paying an annual dividend per share of 4p.

Over the next thirty years the company doesn’t grow its profits but maintains them.

Dividends stay at 4p per share and the share price stays at 100p.

If you had kept your 1000 shares you would have received an annual dividend income of £40 (1000 x 4p) or £1200 over thirty years.

With your 1000 shares still worth £1000, your investment value would be £2200 (£1,000 + £1,200).

But if you had reinvested the dividends and bought extra shares (To keep things simple, I’ve ignored the impact of broking commissions and buying whole shares here) each year you’d have ended up with a much better result.

At the end of thirty years you would own 3243 shares worth £3243 and have an annual dividend income of £125. This equates to a yield on initial cost of 12.5% (£125/£1000).

An investment of £1,000 in Bob’s Book Stores over 30 years:

	Left alone	With dividends reinvested
Value of shares	£1,000	£3,243
Income Received	£1,200	£0
Investment value	£2,200	£3,243
Annual income in year 30	£40	£125
Yield on cost	4.00%	12.50%

That said, if you pick the right investments you’ll find that dividends don’t stay the same for thirty years – they can often increase substantially.

This makes dividend reinvestment and the power of compound interest even more attractive – if you can find the right share at the right price. More on this in a short while.

It’s worth adding that companies which have an explicit policy of paying and growing dividends (known as a progressive dividend policy) usually aim to increase their payouts by at least the rate of inflation every year.

Dividend re-investment in the real world and total returns

Theory is all well and good, but what about what happens in the real world?

The chart below compares the value of the FTSE 100 (the lower or red line) with the value of the FTSE 100 Total Return index (the higher or blue line), which includes the effect of reinvested dividends since 1994.

You can now see that the total return index is worth a lot more than the FTSE 100 index.

This is important as it should make you look at investment results in a different way. Investing in shares is not just about the changes in share prices, it’s about the total returns which includes the dividends you receive.

However, the point I want to get across is that dividends matter and can make up a large chunk of the returns that you get from owning shares over the long run.

Dividend reinvestment with individual companies

Buy the right share at the right time and the right price and you can see spectacular results. Take British American Tobacco (LSE:BATS) for example.

Let’s say you bought 1,000 shares of this company on the first trading day of 2000 for 332.5p (an investment of £3325 excluding stamp duty and dealing costs) when it was paying an annual dividend of 22.2p (or a dividend yield of 6.7%). The shares were very cheap as many investors ignored them and put their money into glamorous internet shares.

Just over fifteen years later though in January 2015, BAT shares are priced at 3522p and are paying an annual dividend of 144.9p. Most people would be quite happy. The shares have soared as has the annual dividend per share.

Even if they had spent their annual dividend income, their investment would have increased in value more than ten-fold to £35,220. The dividend income as a percentage of the original price paid (144.9p/332.5p) – or the yield on cost – would be an impressive 43.6%.

But say you’d reinvested your dividend income every year and bought more shares with it. Your investment would have soared in value to £69,335 with an annual dividend income of £2753.64 – or a yield on cost of 82.9%.

An investment of 1,000 shares in BAT since January 2000

	Left alone	With dividends reinvested
Value of shares	£35,220	£69,335
Income Received	£1,112.60	N/A
Investment value Jan 2015	£36,332.60	£69,335
Annual income Jan 2015	£1,449	£2,753.64
Yield on cost	43.60%	82.90%

Of course, hindsight is a wonderful thing but this example does highlight three very important rules of a successful dividend re-investment strategy:

1. It helps to buy shares at a cheap price. Back in 2000, companies like BAT were out of favour as investors piled into glamorous internet and technology shares. With a dividend yield of 6.7%, the shares looked – and turned out to be – very cheap given that the business was not in trouble and had been increasing its dividend.
2. The importance of dividend growth. Your returns can be turbo-charged if the company is capable of delivering high rates of dividend growth. BAT’s annual dividend growth over the last 15 years averaged 13.3%.
3. The power of time. The longer you invest for, the greater the power of compounding on your investment returns.

The emotional benefits of dividend re-investment

This is a very powerful investing strategy, especially for shares with high dividend yields that are capable of growing their dividends year after year.

What’s particularly good about it is that you focus your attention on the performance of the company and its ability to keep paying a growing dividend rather than what’s happening to the share price. The bigger the amount of your investment return that comes from dividends and their reinvestment, the less you tend to worry about share prices.

In fact, with this investment strategy you can actually welcome falling share prices. As long as the underlying business is sound, a falling share price allows your dividend to buy more new shares which means more dividends to potentially boost your long term returns.

With this mindset, you worry less and concentrate on what’s important rather than the short-term whims of the stock market. To me this is proper investing and more people would be better off – financially and emotionally – if they put their money to work this way.

That said, evidence suggests that very few investors follow this strategy as the average time that people hold shares is becoming increasingly shorter which means that there is insufficient time for it to pay off.

Buy and hold is not the same as buy and forget

This strategy is based on holding on to a share for a long period of time. This is known as a buy and hold strategy. However, this must not be confused with a buy and forget strategy.

Whilst you do hear stories of people who had left shares invested and forgotten about them for 30 years, and then to find out they had become millionaires, it is probably wiser to keep an eye on your investment from time to time.

I’m not talking about obsessing about share prices every day. Instead you should read the company’s half year and full year results statements to see that all is well and that your dividend is still safe and growing.

The other thing to keep an eye on from time to time is the dividend yield on your shares. This is important because it represents the rate of interest you are getting on your reinvested dividends.

Back in 2000, the dividend yield on BAT shares was 6.7%. This was the income return you would get by reinvesting the dividend. In January 2015, the dividend yield – and reinvestment rate – had fallen to 4.1%. The rate of dividend growth has also slowed down a lot. When this happens, the incremental value from reinvesting diminishes.

What you need to be constantly asking yourself is whether you can reinvest at a higher rate elsewhere? You can search for shares with high dividend yields and dividend growth potential with ShareScope. I’ll be showing you how to do this shortly.

How to set up your own dividend reinvestment plan

Reinvesting your dividends is fairly straightforward. With funds (not exchange traded funds or ETFs) you can buy what are known as accumulation units that do this for you. Alternatively you can set up an automatic dividend reinvestment plan for individual shares with your broker (often restricted to shares that are in the FTSE 350 index) who will reinvest dividends for you for a small fee.

If you don’t want to reinvest back into the same share (for example if the price has gone up a lot and the dividend yield is too low), you can always just let your dividends increase your cash account over a year and then reinvest the money later on when you find a good dividend paying share at a reasonable price.

Looking for reliable dividend payers with ShareScope

1. A minimum dividend yield of 3% – I want a reasonable starting dividend return.
2. Minimum dividend cover of 1.5 times – the higher the cover, the better. However, I don’t want to exclude mature industries such as tobacco, telecoms and utilities where dividend cover can be lower but still mean that the dividend can be quite safe.
3. Dividend years of payments – At least 10 years. This means that companies that have missed a dividend payment – and often do when times get tough – can be excluded from the list of possible investments.
4. A minimum return on capital employed (ROCE) of 10% – This would indicate that the company concerned is a reasonable business and can earn respectable returns on the money it invests, which in turn suggests that it can keep on paying a dividend.
5. Forecast dividend growth greater than the rate of inflation – I’ve set a minimum growth rate of 4% so that the dividend increases in value after inflation.

The temptation when you find shares that look interesting based on their numbers is to rush in and buy them.

This can often be a mistake.

Take your time and do your homework.

• Study the company’s financial history
• Read the latest news
• Check that the directors own a decent chunk of shares
• Look at the recent share price performance.

This should be seen as the bare minimum amount of research that you should do.

Following a disciplined approach means that you can learn a great deal about a company.

I also like to read the front half of the company’s annual report which gives a flavour of the company and its short- and longer-term objectives.

You won’t know everything – no outside investor ever does – but you should have enough information to know what you are buying and why.

The real skill in investing often rests with having the patience to wait and pay the right price.

Dividends to live on

People regularly rely on the dividend income from shares as a source of income to live on – especially in retirement and they are not buying an annuity.

If you are looking for dividend income to supplement your pension, then you can look for shares that might help you to do that in ShareScope.

1. A minimum dividend yield of 4% – The yield needs to be sufficiently high to provide a reasonable amount of income.
2. Dividend cover of at least 1.2 times – so reasonably covered by profit but allowing a large portion of profits to be paid out.
3. Continuous dividend payments for at least ten years. I want some comfort that the company has been able to pay some dividend when times have been tough. This gives me some confidence that it might be able to weather economic storms in the future.
4. Minimum forecast dividend growth of zero. I am looking for the dividend to be at least maintained at its current level.

Using dividends to find outstanding companies

Outstanding companies don’t necessarily have to pay a dividend or have paid one for a long period of time.

However, companies that have a long track record of increasing their dividend per share every year are often those with the characteristics of great companies.

An ability to keep increasing a dividend payout in recessions, pandemics and in the face of competition is one that generally serves investors well – again with the proviso that they buy the shares at a fair price.

When it comes to the UK stock market, only 10 companies have been able to increase their dividend per share for 20 years or more.

In the S&P 500 over in the US, that number increases to 14.

Posted on 4th October 2015 | By Phil Oakley

Updated: August 2024

This article is for educational purposes only. It is not a recommendation to buy or sell shares or other investments. Do your own research before buying or selling any investment or seek professional financial advice.

Q4 2025 Dividend Declaration

As previously indicated, the Company will pay a dividend of 2.50 pence per share (“pps”) for the period 1 October 2025 to 31 December 2025, (2024 Q4: 2.20 pence per share) amounting to 10pps for 2025. The entire dividend will be paid as a REIT property income distribution (“PID”).

Shareholders have the option to invest their dividend in a Dividend Reinvestment Plan (“DRIP”), and more details can be found on the Company’s website https://www.regionalreit.com/investors/investors-dividend/dividend-reinvestment-plan.

The key dates relating to this dividend are:

Ex-dividend date	26 February 2026
Record date	27 February 2026
Last day for DRIP election	20 March 2026
Payment date	10 April 2026

The level of future payment of dividends will be determined by the Board having regard to, among other factors, the financial position and performance of the Group at the relevant time, UK REIT requirements, the interest of shareholders and the long-term future of the Company.