My favourite FTSE income stock has just paid me £408.27. Here’s how I plan to turn that into a million

During the last 12 months I’ve been including one FTSE 100 earnings inventory after one other to my Self-Invested Private Pension (SIPP). Right now, I really feel like I’m beginning to reap the rewards.

Final spring, I made a decision it was an excellent time to load up on dividend paying blue-chips. First, many had been extremely low-cost as traders chased red-hot US tech shares as an alternative, however I felt the sell-off had gone too far.

Second, many supplied ultra-high yields. I calculated that when rates of interest peaked and bond yields and financial savings charges began to fall, their dividends would look much more engaging, in relative phrases.

Chasing excessive dividends

With the FTSE 100 hitting all-time highs, the primary of those assumptions seems to have come good. The second has been delayed, as we’re nonetheless awaiting that first rate of interest lower. But it should come, most probably in June. Extra ought to observe.

Most of my excessive yielders are up properly since I purchased them, notably Lloyds Banking Group and Taylor Wimpey. There’s one exception although. Wealth supervisor M&G (LSE: MNG). Paradoxically, once I purchased it, this was my favorite dividend inventory of all, yielding greater than 9%, because it nonetheless does right now.

I invested £2k on 12 July, 8 September and once more on 30 November. In order that’s £6k in complete. I obtained my first dividend in early November, an interim cost of 6.5p per share. This was based mostly on a £4k holding (I hadn’t invested my closing £2k then) and gave me £133.93. 

This morning I obtained my second. This was based mostly on my full holding (together with my reinvested dividend). The payout was additionally greater at 13.2p per share. My SIPP account is now £408.27 to the great. The money can be robotically reinvested straight again into M&G.

This received’t make me a millionaire by itself, in fact. However then it’s not the one dividend I’ll get this 12 months. My Taylor Wimpey dividend hits my SIPP tomorrow. My Lloyds dividend lands on 21 Might. Authorized & Basic Group‘s is scheduled for six June. And on it goes all year long.

Excessive and rising yield

Though dividends are by no means assured, with luck mine will rise over time, for 2 causes. First, most firms look to extend payouts yearly, if money flows are sturdy sufficient. Second, I’ll additionally get dividends on the shares I purchased by reinvesting earlier dividends. These small, common, reinvested payouts will roll up properly over time.

After a vivid begin, my M&G shares have sadly retreated. I’m up simply 3.56%, earlier than dividends. Over 12 months, the inventory’s up simply 0.84% (in opposition to 7.67% for the FTSE 100 as an entire).

That’s partly as a result of ‘greater for longer’ rate of interest outlook. M&G’s full-year income, revealed on 21 March, jumped a powerful 28% to £797m, smashing expectations of £625m.

I really feel markets have been harsh. Or maybe I’ve purchased into a worth lure. Time will inform. But if the yield holds I’ll double my cash in round seven years, even when the M&G share value doesn’t develop in any respect. I’ll deal with any capital progress as a bonus.

Right now marks one other step in the direction of retirement. A small one, sure. However investing is all about taking small steps, over a protracted, very long time.