The Smart Investor
    Facebook Instagram
    Thursday, March 23
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»Dividend Stocks»Here’s How Your Dividends Can Help to Generate Even More Dividends
    Dividend Stocks

    Here’s How Your Dividends Can Help to Generate Even More Dividends

    Royston YangBy Royston YangOctober 16, 20204 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Coins Growing
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    There’s probably nothing more joyful than hearing that “ka-ching” when a dividend cheque lands in your bank account.

    Of course, the days of receiving dividends in the mail are numbered as electronic transfers eventually take over this manual process.

    What hasn’t changed, though, is the ability to enjoy a passive flow of cash just by buying dividend-paying stocks.

    Here in Singapore, an income-focused investor can find many opportunities to load up on companies that pay a steady, consistent dividend.

    One example is REITs, which are well-known for being dividend vehicles as they have to pay out 90% of their earnings to enjoy tax benefits.

    Even during this crisis, certain REITs haven’t been badly affected and can continue to pay out dividends to their unitholders.

    What’s more intriguing, though, is the ability to grow your passive dividend flow over time.

    This is akin to planting a tree now to enjoy the fruits of success many years later.

    Here’s how you can tap on your dividends to generate even more dividends down the road.

    Turning on the tap

    For a new investor, you can start by deploying some money into dividend-paying stocks.

    Those who have just started working and saving may not have a lot of funds for investment, but that’s all right.

    You can start investing in REITs with as little as S$1,000, and then gradually build up your investment portfolio.

    The important thing is to start turning on the dividend tap, even though it may only be a trickle, to begin with.

    Don’t feel discouraged as it takes time, effort and patience to turn that trickle into a gush.

    Steadily-rising dividends

    The next step is to select companies that have strong fundamentals and can enjoy sustained, multi-year growth.

    As their business improves and profits and cash flow rise, they should also naturally pay out increasing dividends.

    The key is to choose companies that not only demonstrate a track record of growth but can also remain resilient during crises.

    Some businesses have managed to raise their dividends despite the severity of the economic damage wrought by the pandemic.

    Over time, the increase in dividends will increase your flow of passive income.

    The gift that keeps giving

    And here is where the magic begins.

    As you begin to receive more dividends, you now have the opportunity and flexibility to plough some of this money back into your stock portfolio.

    Combined with any spare cash you may have, you can then scoop up even more shares of these resilient, dividend-paying businesses.

    With higher share ownership in these successful businesses, you will be enabling more dividends to flow into your bank account over time.

    The process of using your dividends to generate ever-higher levels of dividends is known as compounding, and Albert Einstein was said to remark that “compounding is the eighth wonder of the world”.

    Like a gift that keeps giving, this flow of dividends will continue even as you go about your daily life, and without any effort on your part.

    By rolling over your dividends back into the very same stocks that paid out those dividends, you are in effect making your money work harder for you.

    This is opposed to leaving the same amount sitting idly in a bank account, where it will surely get eroded by inflation.

    If you add on the fact that the dividends from such companies are also rising as you reinvest the dividends you receive, it’s akin to receiving a double bonus.

    Get Smart: A roadmap for success

    So, the secret to generating a flow of dividend income is out, and it’s not that tough to understand or implement.

    There is a clear and defined roadmap for success – simply invest in dividend-paying companies, reinvest the dividends you receive, and hold onto these businesses over the long-term.

    It’s simple, yet effective.

    However, you need to remember that the ride may get bumpy.

    Volatility in stock markets and dips in the economy will impact share prices, and these may fluctuate wildly based on prevailing sentiment, too.

    The path may be clear, you will need patience and fortitude to stay true to your goals.

    As long as you do not stray from the path, you will be rewarded with greater wealth over the long-term.

    Want to know what stocks we like for our portfolio? See for yourself now. Simply CLICK HERE to scoop up a FREE copy of our special report. As a bonus, we also highlight 6 blue chips stocks trading at a 10-year low. But you will want to hurry – this free report is available for a brief time only.

    Click here to like and follow us on Facebook, here for our Instagram group and here for our Telegram group.

    Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

    Yahoo
    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    Aircraft Engine on Runway

    Can ST Engineering’s Dividend Increase After Clinching a S$430-Million Contract?

    March 22, 2023
    Forklift in Warehouse

    5 Singapore REITs That May Comfortably Weather Higher Interest Rates in 2023

    March 22, 2023
    Person Putting on Rubber Gloves

    Top Glove Surged 21.4% in the Past Week: Are the Glovemaker’s Troubles Over?

    March 21, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.