Brief Summary
This video provides a step-by-step guide for Nigerians on building a dividend-paying portfolio to achieve financial security in retirement. It outlines three key steps: selecting the right dividend-paying assets (Nigerian stocks, REITs, and international ETFs), using dollar-cost averaging for consistent investment, and strategically reinvesting dividends. The video also highlights the importance of starting early, being consistent, and avoiding the common mistake of investing solely based on high dividend yields without considering company fundamentals.
- Buy dividend-paying assets like Nigerian stocks, REITs and international ETFs.
- Use dollar cost averaging by investing consistently every month.
- Reinvest dividends strategically through automatic reinvestment, manual reallocation or taking income.
Introduction: Building a Dividend Portfolio for Retirement
The video addresses the question of how to create passive income to sustain retirement by providing a step-by-step tutorial on building a 12 million naira dividend-paying portfolio. The potential to earn 12 million naira annually in dividends depends on the amount invested monthly and the selection of dividend-paying assets. The tutorial is designed for beginners and covers what to buy, when to buy, and where to reinvest dividends, with specific relevance for Nigerian investors. The video also points out a critical mistake that many Nigerian investors make, which can cost them millions in potential returns.
Step 1: Selecting Dividend-Paying Assets
The first step involves choosing the right dividend-paying assets. In the Nigerian stock market, strong options in the banking sector include Zenith Bank, GT Bank, Access Bank, Fidelity, and UBA. Consumer goods offer Dangote Cement, while the oil and gas sector features Seplat Energy, Total Nigeria, and Oando PLC. For Real Estate Investment Trusts (REITs), the best-paying options in Nigeria are UPDC REITs, Sky Shelter Fund REIT (SFS REITs), and Union Homes REIT (UNOM REIT). International investing is also an option using apps like Bamboo, Optimus, and Trove, which allow investment in ETFs like SCHD or VYM, and global dividend funds for diversification. For those needing assistance, one-on-one consultation sessions are available to analyse financial situations, create investment strategies, set up investment accounts, and develop long-term wealth-building plans.
Step 2: Dollar-Cost Averaging (DCA) - When to Buy
The second step focuses on when to buy, advocating for the Dollar-Cost Averaging (DCA) method. Consistency is key to building wealth, so setting up recurring investments is essential. Starting with an affordable amount, even 10,000 naira monthly, is a good start, but it's important to increase this amount over time. Platforms like Bamboo or Optimus are useful for international stocks, Trove for global and local investments, and traditional stockbrokers like Cardinal Stone and Stanbic IBTC stockbrokers for Nigerian stocks. Investing 100,000 naira monthly for 25 years with a 12% annual return can result in a final portfolio value of 170 million naira, where 140 million naira comes from compound interest.
Step 3: Strategic Dividend Reinvestment
The third step discusses where to reinvest dividends. Many platforms allow automatic reinvestment into the same stock. Alternatively, manual reallocation involves collecting dividends and choosing where to reinvest, such as diversifying into different stocks or buying more of the best-performing shares. A third option is to take dividends as income, which is ideal during retirement or to supplement other income sources.
Avoiding Common Mistakes and Portfolio Allocation
A common mistake to avoid is investing in a stock solely based on a high dividend yield. Always check company fundamentals, such as revenue and profit growth, dividend sustainability, and stock price trends. A sample portfolio allocation includes 30% in stable Nigerian companies (e.g., Dangote, MTN, Zenith), 20% in Nigerian REITs, 30% in international dividend ETFs, and 20% in growth stocks for capital appreciation. With 150,000 naira monthly investments and proper diversification, targeting 12 million naira in annual dividends by retirement is realistic, assuming a 10% annual investment growth and a 4-6% dividend yield.
Getting Started and Key Takeaways
To get started, open investment accounts with platforms like Bamboo, Trove, Cardinal Stone, or Optimus, and start small. Set up automatic transfers to avoid emotional decision-making, research investments, and stay consistent. The best time to start investing was 20 years ago; the second-best time is today. Building wealth through dividends is a marathon, not a sprint.
