Image source: Getty Images
Coffee lovers look the other way now. I am sacrificing my daily latte and snacks to fund a regular investment in FTSE 100 dividend shares. My life hack could generate a second income.
Will caffeine withdrawal be worth it to finance a promising return? I think so, and here’s why.
invest in inverter
My plan is to build an investment war chest by avoiding coffee shops and putting the funds into stocks. Could bring in £2,000 a year (I normally buy for two people). The savings pot will be used for actions in schroders (BVL: SDR).
By financing my first year up front, I am able to invest in around 400 shares, based on the current price of around £4.80.
There are two reasons why I have chosen Schroders. Firstly, there is the possibility of the share price reaching £6 (up 25%), as it has three times since 2015. The share price is up 8% so far of the year.
Second, there is a strong dividend yield of over 4%. This could yield more and more valuable returns the longer I stay committed to homebrewing.
Schroders is a UK investment management company with over £700 billion in assets under management and a track record of outperforming market benchmarks. In 2021, it generated record pre-tax profits of £836m on revenue of nearly £3bn.
invest for the future
In the company’s 2021 annual report, group chief executive Peter Harrison referred to a “virtuous circle of investment for growth”.
That includes a focus on sustainability. Schroders is a founding member of the Net Zero Asset Manager (NZAM) initiative. He supports a decades-long plan to prioritize green investments and help companies on the path to net zero.
Harrison said:We must do this for both our business and our investments. The next two decades will be crucial for climate change.
“Today’s successes allow for the investments needed to build long-term capabilities. But those investments will also shape our future 20 years from now..”
This long-term thinking gives me confidence in my plan to make Schroders a multi-year investment. In this way, I can benefit from the compound growth generated by the reinvestment of dividends.
A long-term commitment
If I keep my commitment to ‘Costa-living’ and avoid starbucks, then over five years I will have invested £10,000 in Schroders. Dividend reinvestment could generate £1,300 more if dividend yield averages 4.5%, based on today’s share price.
If I extend the commitment to 10 years, my total investment would grow to over £25,000, including almost £6,000 of potential dividend returns.
Not bad for the price of a coffee.
| Year | Investment | Dividend (4.5%) | total investments | accumulated dividends | Equilibrium (constant stock price) |
| 1 | £2,000.00 | – | £2,000.00 | – | £2,000.00 |
| 2 | £2,000.00 | £183.76 | £4,000.00 | £183.76 | £4,183.76 |
| 3 | £2,000.00 | £284.08 | £6,000.00 | £467.84 | £6,467.84 |
| 4 | £2,000.00 | £389.01 | £8,000.00 | £856.85 | £8,856.85 |
| 5 | £2,000.00 | £498.76 | £10,000.00 | £1,355.61 | £11,355.61 |
| 6 | £2,000.00 | £613.55 | £12,000.00 | £1,969.17 | £13,969.17 |
| 7 | £2,000.00 | £733.62 | £14,000.00 | £2,702.79 | £16,702.79 |
| 8 | £2,000.00 | £859.20 | £16,000.00 | £3,561.99 | £19,561.99 |
| 9 | £2,000.00 | £990.55 | £18,000.00 | £4,552.55 | £22,552.55 |
| 10 | £2,000.00 | £1,127.94 | £20,000.00 | £5,680.48 | £25,680.48 |
There is risk involved, not least focusing so much on a single shareholding. However, this is only the part of my portfolio funded solely from a lifestyle change.
That means I have a wide range of other assets to protect me from any financial hit. These include a drop in the share price (which has fallen as low as £3.78 in the last five years) and any reduction in dividend payments.
However, I think there is growth potential ahead. As an investment strategy, I expect it to generate a good return.
var config = {
apiKey: ‘1ed121d592e04642d57912bb369ef696621661a3’,
product: ‘PRO_MULTISITE’,
logConsent: false,
notifyOnce: false,
initialState: ‘NOTIFY’,
position: ‘LEFT’,
theme: ‘DARK’,
layout: ‘SLIDEOUT’,
toggleType: ‘slider’,
iabCMP: false,
closeStyle: ‘button’,
consentCookieExpiry: 90,
subDomains : true,
rejectButton: false,
settingsStyle : ‘button’,
encodeCookie : false,
accessibility: {
accessKey: ‘C’,
highlightFocus: false },
onLoad: function () { // hide Cookie Control recommended settings button.
var recommendedSettingsButton = document.getElementById(‘ccc-recommended-settings’);
if (recommendedSettingsButton) {
recommendedSettingsButton.classList.add(‘hide’);
} },
text: {
title: ‘Privacy Notice’,
intro: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
necessaryTitle: ”,
necessaryDescription: ”,
thirdPartyTitle: ‘Warning: Some cookies require your attention’,
thirdPartyDescription: ‘Consent for the following cookies could not be automatically revoked. Please follow the link(s) below to opt out manually.’,
on: ‘On’,
off: ‘Off’,
accept: ‘Accept’,
settings: ‘Cookie Preferences’,
acceptRecommended: ‘Accept Recommended Settings’,
notifyTitle: ‘Privacy Notice’,
notifyDescription: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
closeLabel: ‘Save Preferences and Close’,
accessibilityAlert: ‘This site uses cookies to store information. Press accesskey C to learn more about your options.’,
rejectSettings: ‘Reject All’,
reject: ‘Reject’,
},
branding: {
fontColor: ‘#fff’,
fontFamily: ‘Arial,sans-serif’,
fontSizeTitle: ‘1.2em’,
fontSizeHeaders: ‘1em’,
fontSize: ‘1em’,
backgroundColor: ‘#313147’,
toggleText: ‘#fff’,
toggleColor: ‘#2f2f5f’,
toggleBackground: ‘#111125’,
alertText: ‘#fff’,
alertBackground: ‘#111125’,
acceptText: ‘#ffffff’,
acceptBackground: ‘#111125′,
buttonIcon: null,
buttonIconWidth: ’64px’,
buttonIconHeight: ’64px’,
removeIcon: false,
removeAbout: false },
necessaryCookies: ( ‘wordpress_*’,’wordpress_logged_in_*’,’CookieControl’,’PHPSESSID’,’fivc’,’fivs’,’fivp’,’Ookie’,’Fool_subinfo’,’_gads’,’_gid’,’_gat’,’_ga’,’__utma’ ),
optionalCookies: (
{
name: ‘Sharing’,
label: ‘I would like content tailored to my personal preferences.’,
description: ‘We work with advertising partners to show you ads of products and services you may be interested in. You can choose whether or not to have ads delivered in a personalised way by setting this option. You can return to review this setting at any time by clicking the "C" logo in the bottom left corner of any page.’,
cookies: ( ‘_ga’, ‘_gid’, ‘_gat’, ‘__utma’, ‘_gads’ ),
onAccept: function () {
// Add Facebook Pixel
!function(f,b,e,v,n,t,s)
{if(f.fbq)return;n=f.fbq=function(){n.callMethod?
n.callMethod.apply(n,arguments):n.queue.push(arguments)};
if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version=’2.0′;
n.queue=();t=b.createElement(e);t.async=!0;
t.src=v;s=b.getElementsByTagName(e)(0);
s.parentNode.insertBefore(t,s)}(window,document,’script’,
‘https://connect.facebook.net/en_US/fbevents.js’);
fbq(‘init’, ‘901682110316659’);
fbq(‘track’, ‘PageView’);
fbq(‘consent’, ‘grant’);
// End Facebook Pixel
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, true ) ;
},
onRevoke: function () {
fbq(‘consent’, ‘revoke’);
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, false ) ;
},
recommendedState: ‘on’,
lawfulBasis: ‘consent’,
},
),
statement: {
description: ”,
name: ”,
url: ‘https://www.fool.co.uk/help/privacy-and-cookie-statement/’,
updated: ”
},
};
CookieControl.load(config);
