One widespread strategy to generate a second revenue is to construct up a portfolio of shares that pay dividends.

I do this myself. One of many shares I personal as a part of my passive revenue plan sells for pennies.

Penny share with highly effective revenue potential

The share in query is Earnings and Development Enterprise Capital Belief (LSE: IGV).

Prefer it says on the tin, it’s a enterprise capital belief. So it invests in small and medium-sized companies it reckons have good development potential.

Relating to its personal development, Earnings and Development has been a non-performer. The share price is down 11% over the previous 5 years.

So why do I prefer it?

The reply lies within the different a part of the belief’s identify: revenue.

This belief has been a strong dividend payer for years. In those self same 5 years, whereas the share price has fallen 11%, the corporate has paid 48p per share in dividends to shareholders.

That’s equal to round 76% of the present share price.

I believe the dividends might carry on coming

Nonetheless, as with all share, previous efficiency isn’t essentially a sign of what might occur in future.

So, whereas Earnings and Development at present has a dividend yield of 9.5%, that doesn’t mechanically imply that £1,000 invested at present will earn £95 of dividends subsequent 12 months.

Nonetheless, I maintain the share as a result of I’ve confidence in its long-term potential in the case of boosting my second revenue. The belief goals to pay at the least 6p per share in dividends yearly. That certainly equates to a 9.5% yield.

Over the previous 13 years, the belief has met or exceeded that focus on yearly.

For that to proceed,  it must proceed producing money, whether or not by way of dividends from firms wherein it has a stake or – extra generally – by promoting a shareholding and producing money.

Publicity to unlisted development tales

It has been doing an excellent job of that through the years.

One danger I see in the meanwhile, nevertheless, is that it isn’t an ideal market wherein to be offloading shares in small firms at an excellent revenue. Or, because the belief managers put it of their most up-to-date annual report, the “exit environment remains subdued”.

Nonetheless, the belief managers have an excellent monitor file of shopping for into promising firms, holding them for quite a few years, after which promoting, generally at a considerable revenue.

There are some duds, in fact: that danger goes with the territory of investing in unlisted firms of their development part.

However general, the method has repeatedly confirmed to work, underwriting the substantial dividend from from Earnings and Development.

That fits me high-quality, because it provides to my second revenue. My expectations for share price development (if any) are modest, however from a dividend perspective, I like this share quite a bit and don’t have any plans to promote it.