As an investor that has a strong focus on FTSE 100 dividend-paying companies, there are certain months of the year that excite me. One of these months is May, and the other is… September. Why’s that? Well, it’s simply because a large number of Footsie companies pay their dividends in these months, which means it’s payday for my investment portfolio!
Dividend bonanza Just look at some of the dividends I’ll be pocketing this month:
Reckitt Benckiser: 73p per share Legal & General Group (LON:LGEN): 4.93p per share Royal Dutch Shell (LON:RDSa) B: 47c per share Imperial Brands (LON:IMB): 31.28p per share Lloyds Banking Group (LON:LLOY): 1.12p per share St. James’s Place: 18.49p per share Prudential (LON:PRU): 16.45p per share Aviva (LON:AV): 9.5p per share Mondi (LON:MNDI): 27.28 euro cents per share Schroders (LON:SDR) non-voting: 35p per share
So, after pocketing 12 dividend cheques in six weeks in May and early June, I’m set to pick up another 10 cheques from FTSE 100 companies over the next month. By putting together a portfolio of dividend-paying companies, I continually receive income from these companies because I’m a part-owner of each business. And while each dividend is relatively small, together they add up to a decent sum.
Compounding my wealth One day I’m hoping to be able to live off this dividend income (which will be tax-free because all of the stocks are held in a Stocks & Shares ISA). However, given that I’m not planning to retire for at least 20 years, the plan, for now, is to reinvest the dividends back into the market to buy more stocks and generate more dividends. In other words, I’m using my dividends to continually compound my wealth by earning a return on my past earnings.
Passive income What I really love about this dividend investing strategy is that, in order to pick up the 10 tax-free dividend cheques I’m set to receive this month, I’ve had to do absolutely nothing. I can spend my time doing whatever I want and the cheques still roll in. It’s true passive income – the holy grail of personal finance.
In addition, look at the economic uncertainty the world is facing right now. We have trade wars between the US and China, and we also have Brexit. Many investors are on edge. However, despite this uncertainty, I’m still receiving dividends payments. And if share prices take a hit, that actually works in my favour as it means I can buy more stocks when I reinvest my dividends.
An exciting strategy All things considered, there are many advantages to being a dividend investor. Not only do you receive passive income on a regular basis but the strategy also enables you to continually compound your wealth by buying more stocks and generating more dividends.
To some people, dividend investing may seem like a boring investment strategy. However, when you start pocketing dividend cheques on a regular basis, it can actually be quite exciting.
Edward Sheldon owns shares in Imperial Brands, Lloyds Banking Group, Prudential, Schroders (Non-Voting), Legal & General Group, Reckitt Benckiser, Aviva, Mondi, St. James's Place and Royal Dutch Shell. The Motley Fool UK has recommended Imperial Brands, Lloyds Banking Group, Prudential, and Schroders (Non-Voting). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019