With everything going on in the world at the moment, squeezing the most out of my money is a priority. Given the benefits I enjoy within my Stocks and Shares ISA, I can combine it with my aim of generating dividend income. Putting it all together, here’s how I’m trying to increase my potential to earn.
Buying into tactical ideas around the core portfolio
It might sound a bit boring, but there’s a widely-followed investment strategy that suggests I hold most of my portfolio in solid, dependable stocks. That’s my core. But then I have some tactical satellite shares, which can be more adventurous. I’ve been trying to apply this when it comes to increasing my dividend income.
When I’m trying to get sustainable dividends, the yield is lower. The 3-6% range contains a lot of reputable companies that have been paying out money for years.
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To try and boost my income, I want to allocate fresh cash (when I have it), to higher-yielding options in the 6-9% range. Sure, my risk is higher. But I’m not putting all of my cash here, or even the majority. It’s there to supplement the rest of my ISA and provide an uplift to my overall dividend yield.
Not being afraid to cut
As a long-term investor, I won’t sell stocks just for the sake of it. However, with my dividend glasses on, it might be key to take action now. For example, what if I own a stock that has cut the dividend for the past couple of years? Or what if the business has completely stopped the dividend in order to preserve cash within the company due to hard times?
In these scenarios, I can rapidly boost my income potential by letting go of that stock and replacing it with a hot dividend stock at the moment. In doing so, I remove a drag that yields me little (or even 0%) and put in the place a fresh company that is on the up.
I simply can’t be precious about holding on to a stock if I firmly believe the outlook isn’t going to get any better.
Ensuring I use my ISA
Like most people, I don’t just have a Stocks and Shares ISA for my investments. I have accounts with different providers based on what I can be offered. The important thing for me is to ensure that as many of my income stocks can be in my ISA as possible.
This is because of the tax benefits I get by holding it in the ISA. If I don’t keep it here and exceed my annual allowance, I could have to pay up to 39.35% in tax on the dividend amount. So if I want to turbocharge my money, I want to make sure I don’t have to pay tax I don’t need to!
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
