The UK markets are closed today, but the Snowball will have earned £82 before they re-open tomorrow.
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One problem with Compound Interest it takes time to make noticeable growth.
An good example would be the thread Snowball, where if you could double your income stream in seven years instead of ten, you could start to re-invest
7 years 14k
14 years 28k
21 years 56k
yep, an interest rate of 56% on seed capital, no guarantees though.
As your intention is to live off the dividend stream when you retire, you would have no inclination to kill the Golden Goose that lays the Golden Eggs so you would have no interest in the value of your portfolio in 21 years time.
If you had 100k of your hard earned you might not wish to take the risk of a strategy new to you. Those who have a modest amount to invest but can add new funds on a regular basis may be more willing to take the chance. If you are still undecided look at the compound growth of house prices.
Using data from Nationwide Building Society, the average UK house price has risen from £1,884 in1953 to a staggering £270,867 in the 1st quarter of 2025.
I’ve just earned £1,104 of passive income in 2 weeks, thanks to blue-chip UK dividend shares
Story by Harvey Jones
I’m a late convert to the joys of passive income. In my early days as an investor, I mostly focused on growth. I didn’t know what I was missing.
The last month has been a rewarding one, with a string of dividend stocks in my self-invested personal pension (SIPP) dishing out their half-yearly payouts. And they’ve been in a generous mood.
On 9 May, M&G (LSE: MNG) kicked things off by paying me a chunky £458. That was the biggest of the lot, and unsurprisingly so, given that it has the single highest yield on the FTSE 100 at 9.31%.
M&G is a brilliant dividend stock
That’s what attracted me to the wealth manager in the first place. But as ever with a supersized yield like this one, it’s important to check whether it’s sustainable.
Yields are calculated by dividing the dividend per share by the share price. So when a stock price falls but the dividend stays the same, the yield rises. A really high yield can therefore signal trouble. I don’t think that’s the case with M&G.
Its shares are up a modest 8.6% over the last year, and 77% over five years. That latter number flatters it slightly, as it’s measured from the 2020 pandemic lows, when every stock was on the floor.
Risks and rewards
I’m happy to take the risk to get a higher return. I’ll mitigate it by holding a spread of different stocks, which I plan to keep for the long term. That helps me ride out short-term volatility.
As it turned out, 9 May was a red-letter day as FTSE 100 housebuilder Taylor Wimpey paid me £165. It’s another ultra-high-yielder, offering 8.04% on a trailing basis. No savings account can match that.
On 14 May, FTSE 250 insurer Just Group chipped in £45. All contributions welcome, even modest ones. Given the Just share price is up 38% in 12 months, and 75% since I bought it in November 2023, I’m not complaining.
Lloyds Banking Group picked up the pace by paying me £207 on 20 May, and insurer Phoenix Group Holdings kindly sent me £229 the day after.
Compound growth
In total, I’ve received £1,104 of passive income in a fortnight. I haven’t spent a penny of it. Instead, I’ve reinvested the lot straight back into the same stocks, which means I may earn even more dividends next year.
The fun is over for now but I should enjoy another income spree in the autumn, when the next set of dividends land. I’ll plough those straight back into my SIPP, to help my pension compound and grow over the years. Then when I finally retire, I’ll draw them as income, to top up my State Pension. With luck, I’ll be getting a lot more by then.
The proof of the pudding is in the eating. Below is the journey of the Snowball to date.
The Snowball was started with a seed capital of 100k and the first dividend was earned on the 25/11/22.
Dividends to date all year end.
2022 £1,609.21
2023 £9,422.59
2024 £10,796.00
The actual amount of dividends varied as some companies paid a special dividend which isn’t repeatable.
The plan copied below was to increase the Snowball by compound growth of 7% per year.
The snowball effect in investing refers to the power of compounding, where small investments grow exponentially over time. This concept is central to long-term wealth building, and Warren Buffett himself has famously used it to amass his fortune. As the Snowball rolls along the Snowball gathers more mass and continues to grow in size.
How It Works:
- Reinvesting Profits – When you reinvest dividends or returns, your investment base grows, leading to even larger future returns.
- Compounding Interest – Earnings generate more earnings, creating a cycle of exponential growth.
- Consistent Contributions – Regularly adding to your investments accelerates the snowball effect.
Example:
Imagine you invest in dividend-paying stocks. Over time, as dividends are reinvested, you acquire more shares, increasing your future dividend payouts. This cycle continues, leading to massive wealth accumulation.
Chat GPT
The plan.
Year End Dividends
2023/£7,000
2024/£7,490
2025/£8,014
2026/£8,575
2027/£9,175
2028/£9,817
The current projection for 2025 is £10,000 because the yields on most REIT’s and Renewables were above 7% for the period above. Note that most REIT’s have corrected in value and as the price rises the yield falls. Also remember most Investment Trusts try to increase their dividends by inflation or above.
The Snowball is well ahead of the time line with the current expected dividend equal to the year end of 2028.
The fcast for next year could be increased to £10,700 with a target of £11,000 but early days for that.
Current earned dividends £3,246.00
Expected dividends by the end of the halfway point for the year £1,552.00
Total £4,798.00
The dividend from VPC of £1,933.00 is not a repeatable dividend so is not included in the figure above but part of it may be used to ensure the Snowball reaches its target for the year of 10k.
Buying yield and running yield.
The Snowball bought AGR for the ‘secure’ yield (buying yield). As the price fell 42p the yield rose, div 3.36p buying yield 8%. Bought a couple days before the xd date 06/03/25 @ 41.39p for the yield and the plan was to hold for the long term and to re-invest the dividends.
AGR received a bid from KKR and the price rose 46.48p , the running yield fell to 7%, so the profit was booked, you can see the total profit is made up of trading gains and dividends received. If you receive a bid it’s mainly down to luck but sometimes it’s better to be lucky than to be clever.
PHP have made a rival bid for AGR and if successful the Snowball would look to buy for the portfolio, maybe.
If you trade, you will need to book some profits to balance out any clunkers in your portfolio.
Remember, as the price rises the yield falls (running yield), although you still receive the yield at your buying price.
Remember if you are wanting to buy, a falling share price increases the yield, although you have to DYOR to decided how secure the dividend is.
7 Top High-Dividend ETFs by Yield for May 2025
High-dividend ETFs offer instant diversification and potential income.
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Updated May 21, 2025
Written by Alana Benson
Lead Writer+ more
Reviewed by Tiffany Kent
Certified financial planner
Edited by Arielle O’Shea
Head of Content, Investing & Taxes
Co-written by Kevin Voigt
Contributing Writer
Dividends can be a powerful source of income, and during times of stock market volatility, dividend-paying companies may even be more stable than their growth-stock peers. To generate income, some investors harness dividends by investing in dividend stocks individually, but there’s another option for those who want to save some time and energy: high-dividend ETFs.
7 high-dividend ETFs
Below is a list of seven large-cap U.S. dividend ETFs, ordered by annual dividend yield. Note that some high dividend ETFs may come with higher risk (rather than the stability some dividend investors are looking for). Always read the fine print, investigate dividends that seem too good to be true and look at the components of the ETF to determine if it fits in your portfolio.
| The best high-dividend ETF is Invesco KBW Premium Yield Equity REIT ETF (KBWY), which currently has a dividend yield of 9.93%. This is based on our screen of U.S. equity ETFs, which excludes inverse, leveraged and actively managed ETFs and any with expense ratios over 0.5%. | ||
|---|---|---|
| Ticker | Company | Dividend Yield |
| KBWY | Invesco KBW Premium Yield Equity REIT ETF | 9.93% |
| XSHD | Invesco S&P SmallCap High Dividend Low Volatility ETF | 7.48% |
| NUDV | Nuveen ESG Dividend ETF | 5.66% |
| DIV | Global X SuperDividend U.S. ETF | 5.61% |
| SPYD | SPDR Portfolio S&P 500 High Dividend ETF | 4.48% |
| RDIV | Invesco S&P Ultra Dividend Revenue ETF | 4.15% |
| SCHD | Schwab US Dividend Equity ETF | 3.96% |
| Source: Finviz. ETF data is current as of May. 21, 2025, and is intended for informational purposes only. | ||
High-dividend ETFs may generate income
Dividend-paying ETFs can be a great tool for those looking to increase cash flow and diversify their investments. They offer a simple solution to getting exposure to a specific investing niche — in this case, stocks that pay a regular dividend.
You can use those dividends to pad your income as many retirees do. You can also reinvest those dividends back into the fund to better take advantage of compound interest and grow your investment portfolio. Whatever you choose, dividend-paying ETFs make it easy to add a large variety of investments to your portfolio all at once.
