We have three baskets for investing: yes, no, and too tough to understand.
Often investors are tempted to make unwise bets due to FOMO (= fear of missing out) but Munger preaches against the politics of envy:
Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There is a lot of pain and no fun. Why would you want to get on that trolley ?
What’s more, he doesn’t think we should be in too much of a hurry:
The desire to get rich fast is pretty dangerous.
Given his incredible success, Munger’s humility is instructive.
Someone will always be getting richer faster than you. This is not a tragedy
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Investment companies have an income advantage which is particularly important during difficult times like these when dividends are under pressure.
Unlike open-ended funds, investment companies don’t have to pay out all the income they receive from their portfolios each year. They can save up to 15% and tuck it into a revenue reserve. This means they can hold back some of the income they receive in good years and use it to boost dividends when businesses may be cutting theirs.
This structural benefit has enabled many investment companies to pay consistently rising dividends through both good and bad years for decades, a record that’s unrivalled by open-ended funds.
It’s important to remember that dividends are never guaranteed and so your income from investment companies, like your capital, can fall as well as rise. It’s the responsibility of investment companies’ independent boards of directors to decide on a dividend strategy that is in the best interests of shareholders.
Dividend heroes
The AIC dividend heroes are the investment companies that have consistently increased their dividends for 20 or more years in a row.
£££££££££££££££
When the next market crash occurs, the dividends of the above shares will be enhanced and in the past has been an excellent time to add selected Trusts to your portfolio.
The rules for the plan, there are only two.
- To own a portfolio of Investment Trusts that pay a dividend to buy more Investment Trusts that pay a dividend.
- Any Trust that drastically changes its dividend policy must be sold even at a loss.
If u buy a Trust at one pound and it yields 8%, if nothing else changes
and the price of the Trust doubles, the buying yield remains at 8%
but the running yield falls to 4%.
If u then sell the Trust and reinvest in another Trust yielding 8%
your yield would be
Buy 1k of shares dividends £80
Sell shares after they double
2k dividends @ 8% £160
A yield of 16% on your initial investment, the Snowball effect.
Here’s how I’m planning for a £2,300 a month second income
The MotleyFool
Oliver Rodzianko gives us the lowdown on his plan for a healthy second income in retirement. He reckons investing is his path to financial freedom.
I absolutely love planning my finances. While others may find this boring, there’s something adventurous to me about slowly building a cache of money over time. My end game strategy is to have a second income in retirement that will pay all my bills, as long as my mortgage is fully paid off. Here’s how I plan to do it.
Rules of the game
The game goes like this. I have to work incredibly hard, as without that, there’s no way I can earn enough to pull off these two goals:
Get a mortgage on a house and pay it off by the time I retire
Build up a £500,000 investment portfolio, independent of the equity in my home
Now, that’s quite a daunting challenge, but I think it’s possible. I’d need to start with just £5,000 and invest an extra £200 a month over 25 years at a total yearly return of 12.5% including price gains and dividends. That would get me to roughly £500,000.
What’s great is that I plan to do all of my investing through a Stocks and Shares ISA. So, I won’t have to pay any tax when I come to sell my investments, or when I receive dividends.
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.
Now, to hit my £2,300 a month dividend income target, I’d need a range of companies yielding 5.5% per year, as well as rising in price regularly. Of course, the risk is that this doesn’t happen.
Shares like these
I like businesses like Record (LSE:REC), which is a currency management firm in the UK. It offers a dividend yield of 6.8%. That’s more than I bargained for, but one thing I’ve learned is to have low expectations and overachieve on them.
I like that the business has a very stable balance sheet. It has less than 20% of its assets balanced by different forms of debt. Also, it’s growing very fast. Over the past three years, its earnings have grown at a 20.7% rate as an annual average.
Also, because the shares have grown in price consistently, if I’d bought them five years ago, I’d be getting 11% of my initial investment every year in dividends now. That’s because the dividend yield applies to the present price, not what I initially paid.
However, I also need to be aware of the risks if I invest in Record. One of the main ones is that its assets are growing faster than its revenues, which can be an indication that the business is becoming less efficient. Over time, this could reduce how fast the shares grow in price.
Covering my bills
If I can build up a portfolio of five to 10 quality and high-dividend businesses like Record, I’ll have great diversification that will help to protect me from anything going wrong in one company.
If all of these businesses average out to a 5.5% dividend yield, I’ll have £27,500 a year. That will also be tax-free because of my ISA.
With that, I might not be taking luxury holidays, but it will certainly give me the ability to do many of the things that I enjoy and live a nice, stress-free life without any active work. To me, that’s true financial freedom.
How I’d try and turn a £20k Stocks and Shares ISA into a recurring £16,634 income
The MotleyFool
Story by John Fieldsend
Here’s how drip-feeding £200 a month into a Stocks and Shares ISA might grow into a recurring £16,634 income – received year after year, come rain or shine – that wouldn’t even eat into the nest egg.
The ISA is crucial. The Financial Times called ISAs “arguably the best investment ‘wrapper’ in the Western world” and it’s hard to disagree.
I can deposit up to £20k a year – with no balance limit – and every pound gets a lifetime tax exemption on interest, capital gains or dividends. These taxes can take off 39%.
436 shares in this FTSE dividend star could make me £1,567 a month in passive income
Story by Simon Watkins
Passive income is money earned through minimal daily effort, which is the sort of idea I like.
Through relatively little work, this new stream of income can provide more choices in life. A better place to live, more exotic holidays, and even the opportunity to work less or to retire early.
For me, there has been no better way of doing this than buying high-quality stocks that pay high dividends.
I have five stocks in my high-yield portfolio. They are Phoenix Group Holdings yielding 10.2%, M&G at 8.7%, Legal & General at 8%, Aviva at 6.9%, and British American Tobacco (LSE: BATS) at 10%.
However, for me it is not enough that the stocks pay high dividends.
They also need to have a strong core business, so they can continue to pay me high yields.
And they must also appear to be undervalued against their peers. I do not want my dividend gains erased by share price losses, after all.
Ticking all the boxes
I recently added British American Tobacco to my high-yield portfolio because it ticked all these boxes for me.
It has a history of paying high yields. Aside from the current 10%, the yields in 2022, 2021, and 2020 were 6.7%, 7.9%, and 7.8%, respectively.
The core business is currently transitioning away from combustible (tobacco) products to non-combustible (vapes and patches) ones.
This appears to be going well so far. Adjusted profit from operations rose 3.1% in 2023 from 2022 to reach £12.47bn. Adjusted diluted earnings per share (EPS) increased 4% over the same period to 375.6p. And adjusted net debt fell 7.4% to £33.94bn.
One risk here is that its transition away from traditional products is delayed for some reason. Another is any litigation from the effects of its products in the past.
Yet the shares currently trade on the key price-to-earnings (P/E) measurement at just 6.1, against a peer group average of 11.8.
A discounted cash flow analysis shows the stock to be around 57% undervalued at the present price of necessarily ever reach that point, but it underlined to me that they are very good value.
Maximising dividends through compounding
Dividend compounding is the same principle as compound interest in bank accounts, but rather than interest being reinvested, dividend payments are.
The difference in returns between withdrawing my dividends paid each year and reinvesting them is massive.
For example, 436 shares in British American Tobacco would cost me just over £10,000.
The 10% dividend on these shares would make me £1,000 in the first year. If I withdrew that, I would receive another £1,000 the following year, provided the dividend remained the same.
If I kept withdrawing my payouts and the dividend stayed the same, I would have made £30,000 after 30 years.
However, if I reinvested the dividends back into British American Tobacco stock, I would have £198,374 after 30 years. That would pay me £18,803 a year in passive income, or £1,567 every month.
This is provided the yield averages the same it may go down or up, as dividends and share prices change. And inflation would affect the buying power of my income.
However, it highlights that big passive income can be generated from a much smaller initial investment.
JLEN
If u want to see the blog history for JLEN, type JLEN in the search box.
RGL has since trimmed their dividend and most probably will
do so in the near future.
LBOW as it winds down, no longer pays a dividend.
Excluding the 2 Trusts above they blended yield is 9%.
VSL, RECI: their dividends are unlikely to increase but provides
funds to re-invest in the portfolio.
The other Trusts the dividends should gently increase excluding
ADIG,TENT which are winding down.
The fcast for the portfolio for dividends earned this year is 8k.
For anyone starting out on their investing journey is
unlikely to earn 8k in dividends in year one.
But the blog portfolio assumes no cash is added to the fire
and it’s likely that you would be making regular contributions
to improve your total return.
If u compound 8k @ 7% for
10 years = £15,760.00
20 Years = £30,960.00
25 years = £49,440.00
Remember you will retain control of your final destination and
all your capital rather than gifting it to a pension provider.
A journey of 1,000 miles starts with one small step.
Confucius
Apax Global Alpha Limited
2023 Annual Dividend Announcement
This notification is made in accordance with the Disclosure Guidance and Transparency Rules.
The Directors of the Company are pleased to declare that a dividend will be payable, for the financial period ending
31 December 2023 in accordance with the following timetable:
| Ex-Dividend Date: | 14 March 2024 |
| Record Date: | 15 March 2024 |
| Payment Date: | 4 April 2024 |
| Total Dividend Payment: | GBP 27,698,083 |
| Dividend Per Share: | GBP 5.64 p |