A diverse set of large-caps provides David Kuo a regular income.
"Why does David always sound so cheerful in the morning?" a listener texted Adam Tomlinson, the presenter on BBC Radio York's Breakfast Show.
"Why indeed?" asked Adam as I was in full flow disseminating the day's main business stories to the programme's listeners.
My answer was quite simple. Essentially I see opportunities to collect dividends -- and compound my portfolio further -- from shares whatever the stock market and wider economy are doing.
The flipside to today's economy
As I explained to Adam on the show, yes, today's see-saw FTSE and general economic problems can be worrying. After all, if a business as renowned as Tesco (LSE: TSCO) can issue a sales warning and watch its shares slump 20%, then what chance do other companies have?
Nevertheless, I told Adam there was a flipside to these trying times -- those businesses that remain standing are likely to capitalise on the woes of others, and thus increase their market share, increase their profits... and hopefully increase their share price.
And that, I said, was essentially why I'm still backing Britain's blue chips... and not even the debt crisis in Europe could knock me off my perch!
What I didn't have time for on the radio, though, was to explain why my investment strategy is to hold a diversified portfolio of solid companies.
Simply put, this approach helps spread my risk (very important with today's uncertainty) as well as provide a reliable stream of dividends. Consequently, I can count on payouts hitting my ISA account whether the FTSE is going up or down.
Indeed, helping me sound so cheerful to the listeners of BBC Radio York is the fact that my portfolio receives dividends every month of the year. Given all the current economic gloom, knowing I'm set to receive a little extra cash each month from my shares it really does make me smile :-)
That said, I must admit I did not create my monthly dividend flow on purpose, though the end result is perhaps not that surprising when I like to invest in a diversified group of blue chips -- many of which declare quarterly payouts.
Anyway, the latest statement from my broker tells me I receive:
- Quarterly payments from Barclays (LSE: BARC), Royal Dutch Shell (LSE: RDSB) and Unilever (LSE: ULVR) during March, June, September and December;
- Quarterly payments from GlaxoSmithKline (LSE: GSK) during January, April, July and October;
- An interim dividend from BT (LSE: BT-A) during February;
- A final dividend from British American Tobacco (LSE: BATS) during May;
- A final dividend from Vodafone (LSE: VOD) during August;
- An interim dividend from Centrica (LSE: CNA) during November...
- ...as well as many other payments!
Of course, my dividend income is not divided equally from month to month -- some months I receive six payments and in others I receive just one.
And as I say, I did not purposely build my portfolio around the timing of dividend payments. Indeed, I would never consider a share purely because it paid dividends during certain months. In my view, you should always select investments based on their prospects -- even if that means your dividend income becomes somewhat lumpy.
But the fact is that -- whatever the market is doing from month to month -- I'm in line for regular dividends that I can then reinvest to help compound my portfolio further. I must say, I do like the feeling of having money to reinvest every month -- it means I should always have a little firepower on hand to take advantage of any market falls.
The season for dividends
Still on the subject of reinvesting dividends, I find this time of the year especially exciting.
You see, many large quoted companies report their annual results in February and then distribute their largest dividends of the year during the spring. So the next few months should see me busy enjoying some extra portfolio cash... and then scouring the market to reinvest my divvies!
To put this time of year into perspective, I've scanned through the FTSE 100 and picked out the twenty largest names that pay spring-time dividends. The table below outlines what I found:
|Share||Dividend type||Pay date||Amount|
|Royal Dutch Shell (LSE: RDSB)||Q4||22 Mar||26.7||1,699|
|HSBC (LSE: HSBA)||Q4||2 May||* 8.81||1,596|
|BP (LSE: BP)||Q4||30 Mar||5.10||969|
|GlaxoSmithKline (LSE: GSK)||Q4 + special||12 Apr||26||1,311|
|British American Tobacco (LSE: BATS)||Final||3 May||88.4||1,736|
|Rio Tinto (LSE: RIO)||Final||12 Apr||57.3||809|
|BG (LSE: BG)||Final||25 May||8.19||278|
|AstraZeneca (LSE: AZN)||Final||19 Mar||* 122||1,561|
|Standard Chartered (LSE: STAN)||Final||15 May||* 32.2||769|
|Anglo-American (LSE: AAL)||Final||26 Apr||* 28.9||284|
|Unilever (LSE: ULVR)||Q4||22 Mar||18.8||241|
|Barclays (LSE: BARC)||Final||16 Mar||3||366|
|Reckitt Benckiser (LSE: RB)||Final||31 May||70||510|
|Xstrata (LSE: XTA)||Final||23 May||* 17.0||510|
|Prudential (LSE: PRU)||Final||24 May||17.2||440|
|Tullow Oil (LSE: TLW)||Final||24 May||8||72|
|Shire (LSE: SHP)||Final||12 Apr||7.96||45|
|Pearson (LSE: PSON)||Final||4 May||28||228|
|Aviva (LSE: AV)||Final||17 May||16||465|
|ARM (LSE: ARM)||Final||18 May||2.09||29|
(* converted from US dollars)
From these twenty names, I calculate final or fourth-quarter dividends totalling some £14 billion have been or are set to be paid during the spring. Through my various blue-chip holdings, I'm certainly pleased to be in line for a share of that massive payout.
And I expect your portfolio has a claim for part of that £14 billion, too!
That just leaves me hoping the market goes lower in the next few months, to allow us all to take advantage of cheaper prices when we reinvest our spring dividends. I can't wait to tell Adam and the BBC Radio York listeners what I've bought.
> David appears on BBC Radio York's Breakfast Show every Tuesday and works with our team of analysts on our Share Advisor newsletter service. He also owns shares in Barclays, British American Tobacco, BT, Centrica, GlaxoSmithKline, Royal Dutch Shell, Unilever and Vodafone. The Motley Fool owns shares in Tesco.