Most of the time when I’m looking at a dividend stock, I check out the yield first. From there, after my research on the company, I consider how much money I could make from the dividends.
If I feel that my investment can generate me £1,000 or more in income sustainably into the future, it gets me excited. Here’s one that I’m considering right now.
Connecting the world
The business is Digital 9 Infrastructure (LSE:DGI9). The fund is listed on the FTSE 250, with the share price down 15.5% over the past year. This in part has helped to push up the dividend yield to 6.53% at the moment.
Digital 9 invests in assets that are primarily involved in the provision, storage or related services around the internet. This includes everything from subsea fibre systems to data centres. It tries to generate a return for investors from rental income, but also in the long run from the periodic sale of infrastructure projects.
I think this is a really interesting sector to focus in on. The digitalisation of the world has already gone so far, but has a long way to go. Part of this is from infrastructure that broadens the reach of the internet, or improves it in existing areas. Yet it also goes deeper into the protection of data and facilities to support this.
Digital 9 also has a tilt towards ESG. For example, it has an investment in Verne Global, which is a 100% renewable-powered data centre campus in Iceland. This will likely make it more appealing to investors that want to focus on ESG friendly stocks.
A dividend stock for my portfolio
The company gets a tick in my box for being sound, but what about the dividend? It has paid out a quarterly dividend per share of 1.5p for the last year. So if I invested £500 now with a share price of 91p, I’d be able to buy 549 shares. If I assume the annual 6p dividend per share continues, I’d pick up £32.94 in passive income.
This clearly is nowhere near £1,000. Yet I’m a patient man and realise that this stock would be part of my broader portfolio. I’m not going to invest £10,000 into this stock tomorrow, it just wouldn’t make sense. Yet if I reinvest my dividends over time, my accrued dividend payments stack up.
If I simply leave my £500 and reinvest the dividends, after 17 years I will have made £1,000 in income. I know this might seem like a long time, but it’s an incredible figure considering I don’t invest a penny more.
Sure, the dividend yield might change in the future. The dividend might be cut, or the fund could be shut down. But I’m not thinking about this stock just in isolation. When I add this in with a host of other dividend stocks, I could be sitting on a fat pile of income several years down the line. I’m looking to buy Digital 9 shortly with free cash.
