Dividends

Successful companies that make profits may choose to share their earnings with investors however this is subject to a myriad of factors. If companies choose to payout dividends, payments may be distributed either annually, bi-annually, quarterly or even as a one off special dividend to investors who hold the shares.

Dividends are never guaranteed and change depending on the health of the business and the state of the economy. Another important point to remember is that dividends will not always increase just because historical payments have increased.

Dividends may even be reduced or cut completely like what happened during Covid-19 pandemic in 2020. The good news is that now we are starting to exit out of this pandemic, companies have started to either reinstate or increase dividends once again.

When looking to build your own portfolio of stocks to generate a passive income, I cannot stress enough to ensure you conduct your own research. I am not talking hour upon hour of endless research however there are some basic steps you should be using when looking into specific equities or stocks. I will cover this subject in much more depth throughout the website. For now here are some very quick, go to basics, which may help:

1, There are many ways to assist us all when researching a particular company’s financial figures which is freely available to all investors, so there is no need to pay for it, its free! These financials (profit & loss) are collated and provided so we can gain a better understanding of the health of the business or investment. In other words it is part of “Their investment case”. Each business will produce annual financial figures not just for end of year accounting but for investors. These figures are then displayed for both institutional & individual investors we can then all make our own informed choices when seeking suitable investments. Therefore use Investor Relation (IR) pages.

2, For further stock analysis we can all find useful information available under the Investors relation section apart from the “Financials”. There are usually subsections for “Dividend History”, “Stock Splits”, “Historical share price” and even a news section etc. Once again the majority of time my first port of call would be to visit the companies own website investor section. This IR pages are the companies own published statistics they share and which will be most relevant for investors / research.

3, When seeking dividend paying companies there are some well known terms for certain companies that have been paying dividends for over 25 years or even 50 years. Terms like “Dividend Kings” or “Dividend Aristocrats”. Therefore having even just a brief understanding and insight of certain companies that have made these lists and hold such status is a great point to start research as we are all seeking quality establish equities. Therefore acquiring a basic knowledge of the businesses that have been consistently paying dividends for over 25 years, can help ease our fears when we are starting out.

Selecting those initial businesses for a new investment portfolio can seem especially daunting if you lack the knowledge or experience as I did back in 2014. At the start I was especially anxious about where to put my hard earned cash as I feared losing it all, I had never invested in the stock market before either.

Once you have selected and made your initial investment in your chosen stock or equity you have started your passive investing journey. Soon you will start to receive the dividends subject to the companies distribution announcements. Companies provide information on ex dividend and payment dates. You can sign up to their email lists for various company announcements, just visit their shareholder section.

Whether you are saving for a house, car, wedding or forward planning your own retirement, by saving regular amounts either into a stocks and shares ISA or a SIPP for a pension your earnings will be tax free too. Therefore aiming to build a passive income can be extremely easy. Contributing extra cash to the fund and combining the dividend income generated will help at the start laying a good foundation of the building blocks required to develop a small portfolio of stocks. Start small and its amazing how things grow!

As your portfolio grows combining the dividend income with regular savings increases further buying power. Using these available funds will continue to the cycle of increasing ones portfolio whilst enabling diversification. Spreading the risk whilst generating additional new sources of income the new holdings or equities deliver. This is compounding in full effect!

This website aims to provide and demonstrate the compounding effect of the steady stream of dividends received within the portfolio and how it contributes towards the next stock or share purchase. The data or individual figures shared is all factual dividends received over a 7 year period so you can see how this looks in a portfolio. I aim to share each companies historical data together with the cumulative yearly earnings by way of helping all investors witness first hand by seeing the effect of compounding. Where possible I will share important ticker codes for each stock we cover so there are easy to use references when you are conducting your own research.