When I invest in a company, it gives me the right to receive any dividends that are paid out. As a shareholder, I want the business to perform well enough so that it can retain some profit but also pay some out in the form of a dividend. With the cost of living crisis, I want to boost the amount of passive income I receive from my dividend portfolio. Here are a few ways I’m trying to make it happen!
Taking advantage of share price movements
With my existing stocks, I know that I’m optimistic about the outlook for each one. Therefore, one way I can boost my income is by investing more in the stocks I already own.
The filter I want to apply is to check for any of my holdings that have fallen by more than 10% in the past year. Those that have (assuming the dividend per share has stayed the same) will offer me a higher dividend yield than when I initially invested.
For example, let’s say I bought a stock at 100p a year ago, with a dividend per share of 5p. The yield at the time was 5%. If the share price has fallen to 90p now, the yield has increased to 5.55%. So investing more in the same stock will enhance my overall level of dividends without having to add new companies to my portfolio.
Targeting high-yield options
The second point is to invest in high-dividend-yield stocks but with a smaller amount of money. Typically, the shares with a very high yield also carry a high level of risk.
This could be due to the share price falling heavily, or due to an unsustainably high dividend payout. However, sometimes there are some genuinely great stocks with exceptional yields.
In order to manage my risk, I can increase my income without actually investing that much. For example, let’s say I typically invest £500 in a particular dividend share, yielding 5% on average. Instead, I could park £250 in a stock with a yield of 10%. The income I get will be the same either way, but it frees up the other £250 for other uses. It also helps to increase the income I get paid on my portfolio, without taking an outsized position with large risk.
Some examples of FTSE 100 stocks that yield at least 10% include Rio Tinto, Persimmon and Antofagasta.
Reinvesting for more passive income
The final point is to take the dividends that I receive and use them to buy more shares. I like this method as it means I don’t have to put in any fresh money. I simply take the income I get, and use that to generate more income further down the line.
I can reinvest it into the company that paid me. Or I can build up a new position in a fresh stock that I like the look of. Obviously, I’ll have to be content with the fact that I won’t be able to spend the dividend money on other things. Future dividends are also not guaranteed. But as I have a long-term aim of building my investments to a significant level, this seems a smart option.