For instance, suppose we accept that average figure and assume over time low price to book value stocks will have average annual total returns of 15%. Then one can merely increase one's total portfolio book value by a net 13% a year, regardless of market prices (some of which will be high and some low), while also assuring that the dividend yield (total annual dividends) on that total book value portfolio is 2% or higher. (Currently the mean yield of the Value Line Investment Survey's basic 1700 stocks is 2.0%, per their report dated 3/14/14, but if the average yield falls below that level, one can still guarantee the desired rate by purchasing more shares of stocks with higher dividends.) Because one is focusing on stocks with higher book values than their share prices, this can be done with a smaller investment than the intended book value target increase each year. That 13% increase in portfolio total book value thus might be attained with a significantly smaller dollar amount investment.
The first step is to look up the book value of each of one's stocks, multiply by the number of shares held, and add this product to similar products for each of one's other equity holdings. Suppose then that one had a total portfolio book value tally of $25,000 at the end of 2013 and that the combined portfolio dividend averages 2.0% ($500 a year). A 13% increase in 2014, while maintaining that level yield, only requires that one increase the total book value by $3250 this year and the annual dividends by $65. Yet since low price to book value stocks require lower investments than their book value for desired levels of increase, one might only need to shell out, say, $2500 or even less in dividend paying low P/Bk equities to attain the intended target for 2014. In this way, over a five-year period one can increase the total book value with dividends sum by $25,500 ($25,000 plus $500 in dividends) to $51,000 (i. e. $25,000 plus $500 in dividends, doubled) yet might only need to have invested $20,000 or less (P/Bk 0.8 or less), spread out over five years, to accomplish it.
This strategy gives one's portfolio a natural buoyancy, for book value that is higher than stock prices is like free money and sooner or later tends to be recognized as such by other investors.