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UK adults spend more than £2 billion on lottery games each year despite never having won. As investing legend Warren Buffett once said: “Nobody wants to get rich slowly.”
Like most people, I buy the occasional line. But I don't delude myself into thinking it's likely to result in great wealth (although it could). After all, the odds of winning the Lotto jackpot are currently 1 in 45,057,474.
Therefore, I think investing in dividend stocks is a much better bet in the long term. I can become a shareholder and instantly be entitled to part of a company's cash flows and dividends.
It doesn't take much luck!
Dividend increases
One thing is Warren Buffett's holding company. Berkshire Hathaway It is characterized by investing in companies that are likely to increase their annual dividends for many years (potentially decades).
Buffett prefers strong brands that sell timeless products and services. And your ideal holding period is “forever“.
A famous example is Berkshire's involvement in Coca Colawhich began to accumulate in the 1980s.
Today, the global beverage giant has just increased its annual dividend for the 62nd consecutive year.
And Berkshire's stake, which cost $1.3 billion in total, is now returning about $776 million. every year. Or 1.3 billion dollars every 20 months. Then there's also the 1,766% share price appreciation. Incredible.
A high-yield British stock
One FTSE 100 The shares I have been buying recently are from the insurance group. Aviva (LSE: AV.).
Even though the stock is up 25% in the last six months, the dividend yield is still 6.7%. That's well above the FTSE 100 average of 3.9%.
Now, I should point out that Aviva is not a dividend aristocrat like Coca-Cola. Your payment history has been up and down in recent years. There may be more obstacles ahead. Or not split at all (that's a risk).
Plus, businesses could always start to suffer if the economy takes a nosedive.
However, the expected payments and returns seem attractive to me.
| Financial year | Dividend per share | Dividend yield | |
| 2025 (forecast) | 38.0p | 7.7% | |
| 2024 (forecast) | 34.7p | 7.0% | |
| 2023 | 33.4p | 6.7% |
The company has been rationalizing and selling overseas assets to focus on its UK, Irish and Canadian markets. As a result, Aviva has significantly strengthened its balance sheet.
Its Solvency II capital ratio – a key measure used to assess financial strength – fell slightly last year, but remained at 207% in December. That is excellent.
Additionally, the company is benefiting from the rise of private health insurance. In 2023, sales here soared 41% year-on-year as NHS waiting lists reached record levels.
Figures from January showed the NHS backlog remained at 7.58 million cases. Aviva could therefore see greater uptake of individual policies and companies paying to cover their employees.
Get rich slowly
In short, my strategy is to regularly invest money in quality income stocks like Aviva and reinvest my dividends along the way. This will add fuel to the fire.
Once this fund is hopefully big enough, I'll live off the passive income my dividend stocks pay out each year.
According to historical data, the average annual performance of the S&P 500 with dividends reinvested over the last 30 years it is around 10.2%.
If the historical average continues (which it may not), investing as little as £75 a week could turn into £1 million in just under 34 years.
I'll take those odds every week!
