The recognised financial advise is to concentrate on the body and leave the tail to luck. Don’t buy anything unless you are prepared to hold for a minimum of 5 years is the mantra.
Good news for those charging for the advice, no complaints for at least 5 years.
When you want to take income from your portfolio, one piece of advice is to buy an annuity.
Canada Life figures show the 65-year-old with a £100,000 pension pot could buy an annuity linked to the retail price index (RPI) that would generate a starting annual income of £3,896. That’s up from £2,195 in the New Year following a 77% spike in rates this year. Oct 22
A huge gamble with your future as the rate could be as above or higher but you have to surrender all your capital so Hobson’s choice.
The next option is to use the 4% rule, you can DYOR using the search button above.
Some people will not trade a dividend re-investment plan as they only concentrate on growing their capital.
If you trade a Snowball, as you never intend to sell any shares as you need the income to live on, the capital figure is of no importance.
A dividend investment plan is the only plan that you write down the yearly outcome and thus a total amount of income you will have when your retire.
You need to major on a ‘secure’ dividend, although no dividend is 100% secure, some dividends are more secure than others.
For those who near to their retirement date may prefer to
move their Snowball to less risky dividends, if they have achieved their plan.
If you have longer to retire you still need some ‘secure’ dividends as a bed rock for your Snowball but could include more higher yielding Investment Trusts and ETF’s. All still subject to the rules for the SNOWBALL
Income funds are a popular choice – how are they changing?
Sunday, May 3, 2026
Eve Maddock-Jones
Funds and Investment Trust Writer
AJ Bell
Related news
Income funds are consistently popular among DIY-retail investors, and even the disruption markets saw during the first three months of the year failed to dampen investor appetite for some of the biggest income funds.
As their name suggests, this type of fund used to generate income for investors, which makes them popular for people like retirees looking to cover regular expenses in the absence of a monthly pay pack. Investors might also use them to cover regular bills or help with school fees.
The UK is a hub within the income space because of its large number of dividend-paying companies. A dividend is what creates the ‘income’ payout for investors. It’s derived from companies opting to pay out some of their profits to shareholders rather than reinvest the cash for growth.
Big US firms such as Apple, Nvidia or Meta do offer dividends but, they tend to be much smaller, ranging from 0.02% to 0.4% yield – this being the financial measure showing how much a company pays out in dividends each year relative to its share price. These firms prioritise reinvesting their profits for growth to create higher stock market returns.
Income funds having to think smarter about how they pay a consistent dividend
While income funds have been a consistently popular buy for retail investors, the sector as has seen a significant change under the bonnet in the past six years.
Prior to 2020, the major dividend paying stocks were well established, allowing the funds buying them to offer fairly consistent income payments to investors.
But when the pandemic and global shut down hit, many firms halted dividend payments for the first time in decades to keep more cash on hand for whatever unknown challenges appeared.
The European Central Bank directly asked banks to cease paying out dividends or buying back shares for around seven months to maintain lending capacity.
The pandemic caused $220 billion of global dividends cuts in 2020, a 12.2% decline with the severe cuts coming from key markets such as the UK and Europe, research by Janus Henderson found.
New research by Peel Hunt found that since the troughs of the Covid-19 pandemic, UK equity dividend payouts have improved significantly “however, the ways in which companies return capital to shareholders have shifted”, as firms prioritise share buybacks to try and bolster their valuations.
The proportion of large UK companies that have bought back at least 1% of their shares over a 12-month period has increased from c.6% in mid-2020 to c.55% at end-2025, outpacing the US, Japan, and Europe. It appears that UK buybacks have peaked, and companies are more focused on growth opportunities and/or balance sheet strength,” Peel Hunt said.
This shift away from dividends for companies has meant that many fund managers will need to broaden the sectors they invest in to keep up their income payments to investors, often looking away from the UK.
Both the JGGI and global Artemis fund mentioned above use their ability to invest in any market to full effect and actually have very little in the UK, between 2-5% of their portfolios.
These are two of the biggest portfolios of this ilk on the market, at £3.1 billion and nearly £6 billion, respectively.
They’re also the best performing portfolios over 10 years across all global and UK income sectors between funds and trusts.
For those that are looking to stick solely to the UK, Law Debenture tops the 10-year performance data, followed by Temple Bar and Man Income.
Kraft Heinz welcomed its new CEO at the start of the year and “reset the strategy” while still offering a yield close to 7%.
But still, among other long-term holdings, dividends were challenged, reflecting Peel Hunt’s broader point that income seekers were having to take a broad view to find opportunities.
You do not need to take high risks with your hard earned.
For those that are looking to stick solely to the UK, Law Debenture tops the 10-year performance data
Become a member of the club, when markets are rising you can take out your profits from your Snowball and re-invest into some higher yielding shares.
When markets are falling or going sideways, re-invest those dividends into your Snowball, where you will get more shares for your money at a higher yield.
Along with fellow members of the club you will be pleased that prices are falling where 90% of non club members will get more worried as each day passes.
Berkshire Hathaway owns approximately 400 million shares of Coca-Cola. With Coca-Cola paying an annual dividend of $2.04 per share, that stake generates roughly:
400,000,000 shares × $2.04 = $816 million per year
That breaks down to about $204 million every quarter flowing from Coca-Cola to Berkshire.
For a single stock position, that level of income is extraordinary. Coca-Cola has effectively become a steady cash-producing asset inside Berkshire’s portfolio, sending more than three-quarters of a billion dollars annually to the conglomerate without requiring Buffett to sell a single share.
These Overlooked Monthly Income Machines Yield Up to 9.9% – And We Can Buy Them on Sale
Brett Owens, Chief Investment Strategist Updated: May 1, 2026
Preferred stocks are a little-known dividend secret. Worth knowing, by the way—they can yield up to 9.9%!
These “forgotten cousins” of common stocks can make a dividend portfolio. Plus, the discounts! Today we can buy a basket with some ingredients fetching as little as 89 cents on the dollar.
A quick refresher on preferreds. When a company needs capital, it typically either sells common stock—the AAPL to our Apple, the JPM to our JPMorgan—or bonds. But there is a third option, and plenty of companies use it: preferred stock.
Like common stock, preferreds give you a sliver of ownership in a company, they can improve in price based on the company’s performance, and they pay dividends. Unlike common stock, preferreds typically don’t enjoy voting rights, the dividend is usually fixed, and it trades around a par value. In fact, these are all bond-like traits, which is why preferreds are often referred to as “hybrids.”
But what really makes preferreds stand out is just how big those dividends are. A company’s preferreds will routinely pay in the mid- to high single digits, which will typically be 2x to 3x what they’re paying on their common shares.
Just look at what a basic preferred exchange-traded fund (ETF) pays compared to the broader market.
Funds in general are a great way to own preferreds for numerous reasons, not the least of which is that they often pay us monthly. But plain-vanilla ETFs have their limitations. They gobble up preferreds with almost no regard to quality or value, which is why we can often do better with human managers at the helm.
We could get that actively managed coverage through mutual funds, but closed-end funds (CEFs) are the superior play. Here’s why:
CEFs’ prices frequently disconnect with the value of their assets, sometimes allowing us to buy a fund for much less than it’s actually worth.
CEFs can take on debt to plow additional assets into their highest-conviction picks, which can supercharge performance and the yields they pay.
CEFs can use options strategies such as selling covered calls to generate even more income than the portfolio would produce on its own.
The result? Yields that blow ETFs and mutual funds out of the water—and translate into a massive yearly salary of $43,000 if we put a $500,000 nest egg into the trio of CEFs I’m about to highlight.
And unlike preferred ETFs, we can buy these 7.6%- to 9.9%- yielding closed-end funds for discounts of between 4% and 11%.
John Hancock Premium Dividend Fund (PDT) Distribution Rate: 7.6%
A great example of the difference the CEF structure makes is the John Hancock Premium Dividend Fund (PDT). Its 7%-plus yield would make it one of the top payers in ETF land, but it’s actually one of the lowest-yielding preferred closed-end funds … because management is playing with a little bit of a handicap.
PDT is a hybrid fund, investing roughly 50% of its assets in preferreds, and the other 50% in plain old common dividend stocks.
The preferred sleeve of the portfolio can hold its own. Its top holdings include preferreds from the likes of Citizens Financial (CFG), Wells Fargo (WFC), and Citigroup (C) that mostly pay in the 6%-7.5% range. The common sleeve? Sure, it includes Verizon (VZ) and a couple of other formidable dividend payers, but most of these companies are throwing off sub-4% distributions.
How does PDT bridge the funding gap? By throwing a lot of extra capital at management’s picks—the fund’s debt leverage currently stands at a thick 34%.
Over the very long term, this willingness to bet big has made itself apparent in two ways:
Much more volatility than a basic portfolio of preferreds.
Returns that not only blow vanilla preferred ETFs out of the water, but are also mighty competitive with even 100% dividend-equity funds.
This Hybrid Portfolio Has a Lot of Horsepower
Despite its run of late, John Hancock Premium Dividend Fund is trading at a wide 11% discount to its net asset value (NAV), meaning we’re effectively buying its preferreds for 89 cents on the dollar. That’s not just cheap on its face—it’s a relative bargain for this monthly payer, too. PDT has, on average, traded almost in line with its NAV over the past five years.
Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund (PTA) Distribution Rate: 8.3%
Most of us have been trained to see “tax-advantaged” and think “municipal bonds.”
As much as I’d like to give Uncle Sam the slip on my preferred payouts, that’s not quite what the Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund (PTA) has to offer. Instead, PTA aims to minimize federal income tax consequences on its dividends by owning preferred stocks that pay qualified dividends—which are taxed at the more favorable long-term capital gains rates—and by adopting more of a buy-and-hold mentality so as not to trigger short-term capital gains. (And when it does pick up short-term capital gains, it’s mindful about offsetting those gains with short-term losses.)
Management isn’t exactly breaking its back to do this. Most preferred stocks pay qualified dividends. And preferreds aren’t exactly day trading fodder, either.
This is a global portfolio of about 300 preferreds, split roughly 50/50 between the U.S. and the rest of the world, mostly developed Europe. Financials, like BNP Paribas (BNPQY) and Royal Bank of Canada (RY), are dominant at almost 75% of assets, which is par for the preferred course. Credit quality is fine if not a little low; about 55% of assets are allocated to investment-grade preferred stocks. Leverage is even higher than PDT, at 35%, helping juice the payout above 8%.
PTA has only been around since 2020 and didn’t exactly charge out of the gate. But a lot of that had to do with timing—many preferred funds took it on the chin through the rate hikes of 2022 and 2023.
Since Its 2023 Bottom, PTA Has More Than Doubled Up the Preferred Standard
Cohen & Steers’ fund is trading at a 7% discount that looks decent in a bubble. However, its five-year average discount is only a hair lower, so it’s technically less expensive than normal, but it’s not a screaming deal.
We can’t get too attached, though. Like with some other CEFs, PTA is a “term” fund that’s scheduled to liquidate on Oct. 27, 2032, though the fund’s board of trustees technically could vote to extend its life by up to two years.
Nuveen Variable Rate Pref & Inc Fund (NPFD) Distribution Rate: 9.9%
The Nuveen Variable Rate Preferred & Income Fund (NPFD), which came to life in 2021, has a similar story. It started trading not long before the Fed’s tightening pounded preferreds, so it looked awful from the start—but it has been in a relative sprint ever since bottoming out in 2023.
Preferred stocks usually pay a fixed dividend, but as this Nuveen fund’s name implies, NPFD is interested in variable-rate preferreds. Sort of.
Most of NPFD’s assets (about 85% right now) are invested in “fixed-to-fixed rate securities,” which step from one rate to another based on a set schedule, not underlying interest rates. Another 9% is dedicated to fixed-to-floating rate securities, which start with a fixed coupon that it pays for a few years before switching to a variable-rate coupon. It even holds a few fixed-rate securities. In all, only about 5% of assets are invested in truly variable-rate preferreds.
The rest of the portfolio details are pretty standard. This is another global preferred fund, at a roughly 60/40 U.S./international blend. About 75% of assets are in investment-grade preferred, so credit quality is good. And the 185-stock portfolio is amplified with 26% debt leverage.
Income investors would be hard-pressed to find a better preferred yield than what NPFD offers—at last check, it was the highest-yielding preferred fund on the market.
A discount to NAV of 4% is modest in the first place, but it’s actually more expensive than its long-term average discounts of almost 9%. So we’re not getting a screaming bargain here—but nearly 10% a month, paid monthly, papers over a lot of sins.
How to Secure Steady Monthly Dividends of Up to 14.9%
If your experience is anything like mine, you’ve been watching your monthly bills climb higher and higher for years—and fast.
Inflation is eating away at Americans’ financial security, which is why people closing in on their nest-egg targets for retirement are suddenly starting to get the jitters.
$1 million to comfortably retire? Yeah, maybe before COVID.
But here’s the thing: You very well may be able to clock out on a realistic amount of money—much less than a million, in fact.
You just can’t do it holding Dow Jones blue chips.
It’s all in the name. These generous stocks and funds average a yield of more than 9% across the board, and some of them pay up to almost 15% a year. That’s enough to live on dividends alone without ever needing to break off a piece of your nest egg to generate cash.
So, retirement on less than a million dollars? Yes. Here’s the math:
A $600,000 nest egg could earn $54,000—in many places in the U.S., that’s enough for a fully paid retirement without even factoring in Social Security!
And let’s say you have managed to stash away a cool million bucks? The 9% Monthly Payer Portfolio would pay you a downright lush $90,000 in dividend income every year.
And you’re not cashing these dividend checks annually. Not quarterly, either.
You’re cashing them every single month.
No dumping money into certain stocks because you’re getting underpaid every third month—just paydays as smooth as when you were collecting a paycheck!
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Summary
In today’s income landscape, selectivity remains critical. High yields can signal risk, but stocks with strong fundamentals prove that higher yields can coexist with discounted valuations.
Higher oil prices can create downside pressure on even the best dividend stocks, as investors price in higher-for-longer interest rates.
However, the underlying cash flow strength, FFO growth, and balance sheet health in these Strong Buy stocks help mitigate risk.
For patient investors, periods of volatility and price weakness may offer attractive entry points, allowing the opportunity to lock in attractive yields ahead of a more normalized macro environment.
I am Steven Cress, Head of Quantitative Strategies at Seeking Alpha. I manage the quant ratings and factor grades on stocks and ETFs in Seeking Alpha Premium. I also lead Alpha Picks, which selects the two most attractive stocks to buy each month, and also determines when to sell them.
Prae_Studio/iStock via Getty Images
Best Dividend Stocks: Yield + Quality = ‘Sweet Spot’
Investors looking for the best dividend stocks are often challenged to balance higher yield and higher risk. So, finding quality stocks within this space requires identifying a sweet spot where yields are high but risk is not elevated. Broadly speaking, yields much higher than 6% can signal risk around fundamental weakness or declining growth potential. However, certain sectors, such as real estate, can often support yields in the 9-10% range without sacrificing quality. This is where focusing on Strong Quant Buys with attractive Dividend Grades comes into play.
“Quantamental” Analysis Outperforms VIG Over Time
Seeking Alpha
During the last 12 years, Quant’s back-tested strategy has delivered very impressive returns, beating the Vanguard Dividend Appreciation ETF (VIG). Looking ahead, the dividend environment in 2026 remains dependent on Federal Reserve policy and geopolitical uncertainty, which has created volatility in both the fixed-income and high-yield spaces. However, with inflation potentially leveling off and interest rates expected to moderate by year-end, the backdrop for selectively owning high-quality, high-yielding dividend stocks remains attractive. While risk remains in the short term, buying opportunities exist for stocks with solid fundamentals.
How I Chose the Best Dividend Stocks With 6%+ Yields
To select the best dividend stocks to feature in this article, I used the Seeking Alpha Stock Screener and chose the pre-selected Top Quant Dividend Stocks and filtered for Quant Strong Buys. I then selected stocks with forward yields above 6%, high Valuation Factor Grades, and attractive Dividend Grades.
Quant Sector Ranking (as of 04/30/2026): 11 out of 171
Quant Industry Ranking (as of 04/30/2026): 1 out of 11
Sector: Real Estate
Industry: Diversified REITs
Seeking Alpha
Beginning with a small but impressive dividend stock selling at an attractive valuation, Alpine Income Property Trust is a net lease REIT that owns single-tenant retail properties leased to high quality companies under long-term agreements. The company’s portfolio consists of solid retailers, such as Wal-Mart (WMT) and Home Depot (HD), supporting stable and predictable rental income. PINE’s dividend yield tops 6% and is backed by reliable occupancy rates and conservative payout ratios. Despite these strengths, the stock trades at an attractive valuation, which is where we begin the Quant analysis.
Seeking Alpha
PINE’s ‘A-‘ Valuation Factor Grade and top industry rank are well supported by its forward P/FFO valuation of 9.02, which represents more than a 35% discount to the sector median. This signals that the market is pricing more risk for the stock likely due to its small-cap status. However, when we look at Alpine’s forward growth estimates, a different story unfolds, helping to support the company’s attractive Dividend Growth Grade.
Seeking Alpha
For a REIT like Alpine Income, FFO (funds from operations) is a core earnings driver, so its 7.60% Forward FFO Growth, which is more than double the sector median, more than supports PINE’s valuation. Furthermore, this supports AFFO expansion and dividend increases, reinforcing the 6%-plus yield. When interest rates finally stabilize, net lease REITs like PINE could see further growth along with continued attractive yields. The combination of steady cash flows and discounted pricing highlights the appeal of larger, mid-cap REITs with similar attributes.
Quant Sector Ranking (as of 04/30/2026): 9 out of 171
Quant Industry Ranking (as of 04/30/2026): 2 out of 3
Sector: Real Estate
Industry: Other Specialized REITs
Seeking Alpha
EPR Properties is a specialty REIT that invests in experiential real estate, such as movie theaters, amusement parks, and ski resorts. While this niche space was once associated with higher risk, a combination of a resilient consumer and EPR’s portfolio diversification and consistent rent collection has restored investor confidence. The company’s 6.6% dividend yield is supported by strong cash and tenant health. Meanwhile, its valuation and dividend growth potential remain attractive.
Seeking Alpha
Starting with EPR’s 10.46 forward P/FFO, this valuation metric suggests a discount of about 25% to the sector median. With growth improving and strong (its ‘A-‘ Growth Factor Grade has jumped up from a ‘C’ in three months), EPR appears ready to support its attractive 6.6% yield. This helps explain the REIT’s sector-leading Dividend Growth metrics.
Seeking Alpha
EPR’s forward FFO Growth of 4.66% is significantly ahead of sector peers, which weigh in at an average of 2.91, and its Dividend Growth Rate – CAGR – over the past five years is more than 10x the sector. With consumer spending remaining resilient through recent geopolitical concerns and the potential for normalization later in the year, EPR offers a unique blend of income and recovery driven upside. That combination leads to a smaller-cap real estate company that operates in a different space but with similarly compelling valuation and yield profiles.
Quant Sector Ranking (as of 04/30/2026): 5 out of 171
Quant Industry Ranking (as of 04/30/2026): 1 out of 3
Sector: Real Estate
Industry: Diversified Real Estate Activities
Seeking Alpha
The RMR Group is not a REIT but an alternative asset management company specializing in real estate and operating companies. So, rather than owning and operating the real estate directly, it earns management fees tied to assets that are owned by REITs. This asset light model generates strong margins and supports its high dividend, offering investors exposure to real estate without the downsides of direct property ownership. RMR has demonstrated consistent fee collection and cash flow stability. This status leads to dividend safety and is complemented by an attractive valuation.
Seeking Alpha
RMR’s forward P/E of 23.62 offers more than a 23% discount to the sector median, and its 4-Year Average Dividend Yield of 10.14% provides historical evidence of its ability to maintain its high dividend. While its ‘C-‘ Dividend Growth Score indicates average growth compared to sector peers, the real estate company’s yield is already high, and its Dividend Safety Score is also attractive.
Seeking Alpha
According to our back-testing, companies with a Dividend Safety Score of at least ‘A-‘ or better have averted a dividend cut 99% of the time. RMR receives a solid ‘A’ grade for dividend safety, which is supported by an FFO Interest Coverage Ratio of 6.36, which is more than double the sector median. This suggests RMR can easily meet its debt obligations, which is a strong signal that its dividend is reinforced by healthy underlying cash flows. For income investors, this presents an opportunity to capture both yield and valuation upside. Taken together, these ideas highlight a broader theme of buying opportunities across the real estate sector.
Conclusion: High Yields and Quality in Best Dividend Stocks
In today’s income landscape, selectivity remains critical. High yields can signal risk, but stocks with strong fundamentals like PINE, EPR, and RMR demonstrate that higher yields can coexist with discounted valuations and attractive Quant Dividend Scores. A near-term risk worthy of consideration is that higher oil prices can create downside pressure on even the best dividend stocks as investors price in higher-for-longer interest rates. However, the underlying cash flow strength, FFO growth, and balance sheet health in these Strong Buy stocks help mitigate risk. For patient investors, periods of volatility and price weakness may offer attractive entry points, allowing the opportunity to lock in attractive yields ahead of a more normalized macro environment.
How the UK State Pension measures up against other countries — and why it’s not enough
Mark Hartley weighs the UK State Pension against other nations, revealing why it’s important for Britons to explore additional options.
Posted by Mark Hartley
The Motley Fool.
Image source: Getty Images
Currently, the UK State Pension is roughly £12,548 a year before tax. That’s a useful safety net, but can it fully fund retirement? Let’s see how it compares to other countries.
Where the UK stands globally
Each year, the Mercer CFA Institute Global Pension Index ranks systems on adequacy, sustainability and integrity.
In 2025, the UK came 12th with a score of 72.2 – solid, but not world‑beating — while The Netherlands takes the top position, thanks to generous benefits and strong regulation.
Netherlands (1st): 85.4
Singapore (4th): 80.8
Australia (7th): 77.6
United Kingdom (12th): 72.2
United States (30th): 61.1
Among the G7 countries, our State Pension is often considered the least generous. UK retirees get only about 22% of average earnings from the state, the lowest in the group.
The upside is that our system scores better on long‑term sustainability because it leans more heavily on workplace and private pensions rather than pushing most of the cost onto the state.
Still, to supplement a State Pension, many people build private savings by investing in the stock market. How does that work?
Retirement investment accounts
For British investors, two popular options are a Stocks and Shares ISA and the Self-Invested Personal Pension (SIPP). Both allow investments in shares, funds and other assets, but they serve slightly different purposes.
With an ISA, money can be withdrawn at any time, and any gains or dividends are tax-free. A SIPP, on the other hand, is designed specifically for retirement. Contributions receive tax relief, but funds are usually locked away until at least age 55 (rising to 57).
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
In short, ISAs are more flexible, while SIPPs offer upfront tax advantages.
So how can an investor aim for the best outcome?
Building a retirement portfolio
Whether in a SIPP or ISA, stock selection is critcal. A balanced portfolio should include some defensive and income stocks to help reduce volatility.
But steady growth stocks are key to building wealth. One example is Coca-Cola Europacific Partners (LSE: CCEP). As a major distributor of softdrinks across large parts of Europe and beyond, it enjoys steady demand and revenue.
The shares are up 91.8% in five years (equivalent to 13.9% annualised), and it has 39 years of uninterrupted dividend payments. The current yield’s only 2.8% but is well covered by earnings.
Price-wise, it looks cheap, with a price-to-earnings growth (PEG) ratio of only 0.45. Profitability looks good too, with a return on equity (ROE) of 24.42%.
So to recap:
Steady earnings resulting in high profitability.
A fair-to-low price with growth potential.
Moderate income appeal.
Of course, no investment is risk-free. Consumer demand for soft drinks can fluctuate, and currency movements can affect international earnings. More recently, sugar and health regulations post additional risks.
But overall, consistent demand backed by years of solid performance is why it’s the type of stock worth considering for a retirement portfolio.
The bottom line
Building a decent retirement pot through an ISA or SIPP takes time, patience and regular contributions. Early on, growth matters most, so many people tilt towards quality companies with room to expand. Later, reliable dividends can help turn that pot into a steady income.
By spreading investments across sectors, blending defensive and growth shares, and making regular monthly contributions, the State Pension becomes a helpful safety net – rather than your only lifeline.
How good are you at knowing what you are trying to achieve, implementing a plan to try to achieve it, and modifying what you do along the way based on what happens?
Investing can involve a steep learning curve and, over time, most investors evolve their style.
But I think it still helps, from the day one starts buying shares, to have some sort of plan about how to invest and what success looks like.
Spotting undervalued opportunities
Ultimately, investing tends to boil down to a number of key elements and an important one is being able to buy something for less than it turns out to be worth.
Ideally, that would be much less than it turns out to be worth.
Simple though that may sound, it can be devilishly difficult in practice. Knowing what a company’s real value is today can already be hard enough – but successful investing also requires someone to assess what it might be worth in future.
If you want to buy CTY, looking at their history gives you some guidance, if e.g. you want to buy at 5% plus you may never have a position.
During the covid crash, you could have bought around £2.80 and the yield would have been 6.5%.
Now 1.5% – currently 2.5%, if you intend to buy and hold forever it makes a big difference to your SNOWBALL. Of course it’s always easier with hindsight but if you bought the yield, you would have a position, even though the price might have fallen further.
MRCH
LWDB
If you want to trade a higher yielder but want to add some safety to your snowball, you could pair trade with a lower yielder to achieve a blended yield of 7%.
You do not need to take big risks with your hard earned.
At the start of 2009 you decided to invest 5k in CTY because even back then they had a long history of increasing their dividends and to KISS, you decide to re-invest the dividends into the share, knowing that even if the price falls, you get more shares for your money and therefore a higher yield.
Your 5k would now have a value of £32,500.
The current yield is 4%, income of £1,300, a yield on seed capital of 26%
If you want to buy it may better to wait for the next market downturn and the yield will increase.
All trades for the SNOWBALL are posted here as soon as they are made.
All buys include a cost of £10 and sales a cost of £5, although you should be able to trader at a lower cost. Costs add up over the years but if sales are made at a profit, however small, it’s the markets money and not yours, as a profit is not a profit until the underlying share is sold.
The SNOWBALL’S first full year of earning dividends was 2023 and the current updated fcast for this calendar year is 12k.
If we look forward to the next 4 years the income stream will be around 16k, hopefully it will be ahead of the fcast.
That equates to a yield of 16% of seed capital, to make comparisons easier no new funds will be added to the SNOWBALL.
Once the SNOWBALL earns 15k of income every year, future dividends could be re-invested into safer but lower yielding shares, as the SNOWBALL prepares itself to drawdown the cash rather than re-invest it.
At present the SNOWBALL invests mainly in UK Investment Trusts as they have both higher yields and trade at bigger discounts to NAV.
IF this no longer applies the dividends will be re-invested into higher yielding ETF’S.
If you have more years of re-investing, you should build up an income stream and have a surplus to re-invest even though you are in drawdown.
