DIVIDEND INCOME PLUS

THE DIP STRATEGY

London Investor Show

Watch this short presentation to see how The DIP works and why it’s proving to be the most popular investment strategy with our clients of the year.

If you are looking to invest in the stock market then there are three golden rules that you should always follow.

Don’t lose money. 
Whilst this may sound obvious most private investors make the common mistake of not protecting their investments. Instead of cutting their losses when they should, they leave them hoping for a recovery.

Earn passive Income.
Dividends from strong, blue-chip companies are the quickest and easiest way to earn a return on your portfolio. This is what you might consider the ‘low hanging fruit’ – it’s easy to make your shares generate cash when they pay you a regular income twice a year for not doing anything.

Generate Capital Appreciation. 
This is where you will see the biggest growth in your portfolio and where the best opportunities lie. However, you need to be careful because this is also where the greatest risks lie if you don’t know what you are doing.

The DIP is brilliant. My advisors have been using it for about two years and so far, I’ve been very impressed with the results. I like the idea that I am getting paid healthy dividends if the price doesn’t move, but if the share price goes up so it gives me the equivalent of three years of dividends my advisor will sell it and crystallise a 15% + profit. 

I have definitely made significantly more money in buying and selling Aviva than I ever would have made by just holding it

D Wardlaw, Cumbria

What’s unique about the DIP

The DIP is entirely different to most of the other professional investment strategies in the market place. That’s because it aims to combine the benefits of dividend paying shares with the benefits of capital growth. Usually an investor will have access to one or the other but not both.

Five benefits to the DIP

  1. It forces you to be in cash at least some of the time offering more protection from a market crash
  2. It forces you to take regular profits which increases your portfolio value
  3. It gives an overall dividend yield which is typically higher than the average portfolio
  4. It gives constant income flow even if the capital value of the shares fall
  5. It is a low-medium risk strategy because it focusses exclusively on FTSE350 companies

In the first few months of using the DIP strategy I made 30% profit in Kier Group in just one month, 11% in ITV in 6 weeks and 15% in Dixons in just 3 weeks. I didn’t collect any dividends but when you make that kind of money who cares about the income!

Of course, they can’t all make that kind of money and a few of the shares have gone down in value but not by much and because they are low risk and I’m making more than 5% on the dividends, I’m very happy to hold.

W Hadley, St Ives

The Book

Due to the growing demand from investors to know more about this investment strategy, a book is currently being written and should be ready shortly. If you would like a free copy of the book please email us at info@dividendincomeplus.co.uk. 

We are giving away 50 free copies!

Find out more


I have been using the Dividend Income Plus strategy for several months and thus far the results have been really good despite the stock market being lower than when we first started. I’m also worried about a stock market crash and so this is the perfect way to maintain some cash whilst still making the rest of the money work for me. So far I have made some good profits on Sainsburys, Hikma, IMI, Lloyds, Taylor Wimpey, Tesco and others, averaging around 7-10% profit in a 2-3 month period..... Continue reading...

Mind you it’s not all been plain sailing and I am holding TalkTalk which is down by about 11% but I’m not worried because the investment manager is monitoring it closely. If it goes much lower we will be selling but that’s really the only one that hasn’t worked. 

I was shocked to find that my biggest winner has been Centrica. I would never have bought that share myself but the DIP gives you the confidence because it follows a system. Centrica is currently making 16% profit plus a dividend of over £1,000 but my investment manager has said that we should only sell if it reaches 20%. That’s comforting for me to know because everything is clear.

The great thing about this strategy is that you don’t hold onto things for too long so your risk is constantly being cut every time you sell. I wouldn’t be happy buying and holding anything in the market right now but just sitting in cash and earning nothing is also something which doesn’t appeal to me so – the DIP is perfect for me. 

Overall I’m very happy with the way it’s going and to date it seems a very encouraging strategy.

M Cook, Studley

Real Trades

This is not a fictitious piece of theory. This is real. It’s a strategy that we currently implement at London Stone Securities, an FCA regulated stock broking firm. You can see the testimonials, look at the statistics for yourself or you can transfer your existing share portfolio and we can implement this strategy for you straight away.

Of course, past performance has no guidance on future performance and we can’t make any guarantees about whether you will or won’t make money using this strategy. In all cases the normal risks always apply.

However at least with the DIP you know the exact investment approach and strategy that we will implement. The DIP strategy is the polar opposite of non-transparent funds that charge an annual fee and that you have no control over. That’s because the DIP strategy is cost-effective (there are no annual fees and so you pay only when you trade), there are no lock-in periods (you can stop investing at any time), and its super-simple to understand. The DIP strategy is also better than just buying dividend paying shares for the long term which don’t give you any capital appreciation.

Our clients tell us that it’s a new and refreshing way to invest, and in some cases even the best strategy that they have ever used. That’s why we are so proud of it.


How does the strategy work?

There are 7 simple steps:

Risk Rating. 
Evaluate the risk of the best dividend paying companies in the FTSE 350. This takes into consideration debt, beta, strength of sector, financials, board of directors, technical analysis, charts and other factors.

Compensation.
From (1) calculate the ‘dividend range’ that is required to sufficiently compensate an investor to assume that level of risk. For example, a company with a high-risk rating may have a compensation dividend range of 6% to 8%.

Buy and Sell prices  
From the higher end of the dividend range calculate the buy price using the formula (Price = Dividend/Dividend Yield). Do the same for the lower end of the range to give you the sell price. Enter the Buy limit order.

Patience
Sit back and wait for the Buy limit order to be filled. If the position is not filled immediately that’s okay. The stock market periodically suffers a correction and during these dips the strategy will often capture several buy orders on the same day.

Sell Order 
Once (4) is filled, enter the Sell limit order.

Sell Order triggered 
If the share price increases and hits the sell order the position is automatically sold capturing a capital appreciation and the cash will return into the dealing account. The whole process is then repeated.

Sell Order not triggered  
If the share does not hit the sell limit price, we wait and collect the high dividend.

Are there any annual fees and costs?

There are no annual fees. There is just a 1% commission whenever a trade is executed. It’s a very simple and fair pricing system. No complex and opaque charges as you often find with funds.

Is this a managed fund?

No - This is not a fund or collective investment scheme.

This is a bespoke portfolio service that is tailor made to suit each of our client’s individual requirements. Our clients complete a simple questionnaire which allows our team to build a DIP strategy which most closely satisfies their needs.

The benefit of this type of account is that it can be adapted to the market very quickly when required. Funds are usually very passively managed with very few changes to the portfolio.

This means that most funds end up tracking the stock market index – that’s good when the market is going up but not so great when the market is going down.

Why is this better than a fund?

Managed funds charge an annual fee regardless of performance, they lock you in with exit penalties and worst of all they give you no control.

After the Neil Woodford scandal where investors lost millions of pounds, more and more people want to take back control. They want to know where their money is being invested, they want greater transparency and they want access to their money at any time. The Neil Woodford fund was one of the most popular flagship funds in the country and it was suspended which meant that investors couldn’t access their cash.

If the stock market crashes or your fund manager invests in illiquid shares then you may find it difficult to get access to your money.

The DIP strategy allows you 100% control and most importantly you can access the funds at any time. You can also see the companies that are being invested into and they will be household names that you recognise. If you’re not happy with any particular company we can remove it from the portfolio.

Do I need do manage the portfolio myself?

No – the DIP strategy is a fully managed service which means that we take care of everything for you.

Our team does the research and analysis, picks the stocks, chooses the entry and exit prices and implements all of the necessary limit orders. Then we wait for the orders to be filled and make the necessary calculations to ensure that we maximise the income and growth potential on each stock.

Is the system manual or automated?

Both. The system runs on a basic trading algorithm which identifies the relative risk of each stock from which the price of the stock is decided. This allows us to automate our buy and sell prices.

However, we also monitor all positions daily and will change the prices according to corporate earnings, announcements and general market developments. Therefore, we implement the initial strategy using automated orders but will move prices manually whenever we need to.

How will I know about the performance of my portfolio?

Every time that a transaction is executed you will receive a contract note (usually within a few minutes) and an email at the end of the day detailing the profit or loss, plus any accrued dividends on that position. You also have 24-hour online access to your portfolio. If you wish to speak to us at any time you can also always call the office and we will be happy to run through the numbers with you.

Are there any lock-in periods?

No, you can stop using the DIP at any point you wish. However, for the best results we normally suggest to implement the strategy at least for a 6-12 month period as this strategy is based on capturing dividends (usually paid twice a year) and capital growth.

Why is this a low-medium risk strategy?

There are many reasons but one of the main reasons is that it only focusses on FTSE100 and FTSE250 companies which pay dividends. This means that if the shares fall in value you are being paid to wait whilst they recover.

What is the biggest risk with this strategy?

The biggest risk is that a company cuts its dividend but this is mitigated through the stringent screening process that all stocks must go through before they can even qualify to be part of the DIP strategy. For example, choosing a company that has a strong dividend cover helps to reduce the likelihood of a dividend cut.

Our system also allows us to sell losing positions if we feel that the share price has little chance of recovery. This helps to put a ceiling on the maximum loss that a client can have. In very extreme cases a company share price can fall to zero but it’s highly unusual that this would happen without significant warnings beforehand which gives you the opportunity to sell beforehand.

Why is this strategy so popular?

It’s a strategy which combines all of the best things that investors look for. Typically, clients look for low risk investments and buy low-risk dividend paying companies but then struggle to know when the best time is to sell. They therefore miss the capital appreciation and can end up holding shares for years collecting the dividends but not maximising the value of their portfolio.

Many of those companies fall back in price and the opportunity to sell and crystallise a strong profit is lost.

The DIP strategy combines the high income that investors want with strong capital appreciation. It also gives greater protection than traditional buy and hold strategies.

Is this strategy short term or long term?

Both.

Short Term - If the shares increase in value quickly then we are prepared to take a profit in which case the DIP becomes a short-term strategy.

Long Term - If the shares don’t increase in value then we simply sit back and collect the dividends. Because we are buying at a discount to the market price when we enter the trade, we will usually collect a much higher dividend. The FTSE100 average yield is around 4.2% but the DIP strategy portfolio yield will typically average 5.5% or higher (this number will vary according to the specific strategy).

Does this strategy work in all market conditions?

Yes. There are three main types of market conditions and the DIP strategy can be adapted for all of them:

  • Bull (Rising) Market – we aim to capture a higher capital appreciation and so the exit price will typically be higher; for example, we might enter sell limit orders at 20% above the entry price as opposed to 10%

  • Bear (Falling) Market – we would typically hold more cash to offer greater protection. The yields that the client receives would also be greater because of better (lower) entry prices.

  • Neutral (Up and Down) Market – the DIP works particularly well during volatile market conditions because it offers more opportunities for investors to maximise the number of profitable trades in any given year.

Does the DIP strategy have losing trades?

Yes of course. It’s impossible for a strategy to only generate winners and our clients don’t expect a 100% success ratio.

Therefore, our job is to recognise the losers quickly and keep those losses to a minimum by selling when we have to. This is something that the majority of private investors don’t do – they don’t know when to sell. The DIP strategy on the other hand gives a very clear indicator about when we need to exit.

The DIP tells us when to exit when there is a profit as defined by the higher end of the risk range and it also shows when to exit when there is a loss. Selling at the right time helps to protect the client portfolio and accepting a manageable loss is part of the DIP strategy.

However, it’s also important to know when NOT to sell. If a share price falls for no justifiable reason (e.g. because it’s being shorted) we can identify this immediately. Provided that the firm continues to pay a healthy dividend, we don’t need to panic because we know that the price is likely to recover once the shorting is covered.

The problem is that most private investors never sell – they don’t sell when their shares go up and they don’t sell when their shares go down.

That’s not really a strategy, that’s more like gambling.

Is it only UK based or can I invest in global equities?

It is UK based because this strategy has been designed in mind for the FTSE350 blue-chip stocks. Investing in overseas companies also incurs higher fees and exposes investors to foreign exchange risk.

However, as a firm we can offer diversification by investing in any other area which may be of interest to you including global funds, preference shares, bonds and other investments. This depends entirely on the client’s specific objectives and personal choice of the client.

You don’t have to invest in the DIP if you don’t wish to or you could implement the DIP as part of a wider managed portfolio strategy.

 Are you concerned about Brexit and political uncertainty?

No. The increased market volatility actually helps to improve the performance of the DIP strategy. Blue-chip companies are being ‘over-sold’ by investors who panic which drives down share prices to artificially low levels which gives our clients better buying opportunities.

Why is it called the Dividend Income Plus?

Because it gives investors more than just dividends. It gives them the usual dividend income plus capital appreciation.

I have been investing in the stock market for several decades but the DIP is definitely one the best strategies that I have come across. 

I used to hold the same funds for years, but now I can make the same amount of money in just a few months. I would never invest in funds again. For example, in Land Securities I made 10% profit and collected two quarterly dividends in 5 months

M Crocker, Cumbria

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The Author of the DIP Strategy

Ranjeet Singh graduated with an MSc in Business Economics from Brunel University and began his working career at Lloyds Bank before moving to RBS-Natwest Markets and then onto Deutsche Bank.

In 2008 he founded the FCA regulated stock broking firm, London Stone Securities, which he runs today and has amassed more than 20 years of direct trading experience with a focus on UK equities, fixed income products and derivatives.

Ranjeet Singh created the Dividend Income Plus strategy from his extensive experience and believes it to be his finest piece of work and one which he is most proud of. You won’t find this strategy anywhere else.

I invested using the DIP strategy in 3 FTSE100 companies and in less than 2 months I made on average 13% in profit plus dividends. 

As a low risk investor, I was nervous about the stock market but this strategy has given me huge confidence, it’s easy to understand and even easier to implement. Iwould recommend it to anybody.

K Hanson, Todmorden

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