2. Consider dividend stocks — and reinvest those dividends
Another way to juice your portfolio is to add dividend-paying stocks. Dividends can be very powerful, as healthy and growing companies will tend to increase their dividend payouts over time, paying their shareholders in both good economies and bad. If you have a $100,000 portfolio with an overall dividend yield of, say, 4%, you’ll be collecting $4,000 annually — without doing any work for it. On top of that, you can hope and expect that the underlying stock will appreciate over time, as well.
As your portfolio grows over time and you approach and enter retirement, dividends can be even more valuable. A portfolio worth, say, $500,000 with an overall dividend yield of 3.5% will deliver about $17,500 in annual income — roughly as much as the average Social Security annual benefit.
You can, of course, add both growth stocks and dividend payers to your portfolio, and in many cases they can be the same stocks. Fairly rapidly growing companies such as Starbucks, Microsoft, Corning, Broadcom, and Cisco Systems all pay dividends.
