How to double your portfolio’s value plus one unloved blue-chip to help reach that goal

There’s no such thing as a “get rich quick” scheme. Building wealth takes a good strategy, conscious effort…and time.

One of the best ways to reach your goals is to start out at the goal and plan your way back to where you are now.

For example, I can show you a simple way to double your portfolio value.

If you plan to double your portfolio value in seven years, let’s say, then you will need to get an annual increase of about 10.3%, based on “the rule of 72”, a little financial trick accountants use.

High yield + regular gain = success

That may seem like a lot to achieve each and every year, but high-yield stocks can return a large part of what you need to reach your 10.3% target.

If a stock is yielding 6.0%, for example, then you just need a simple 4.3% share price gain over a whole year to hit 10.3%.

One place to look for those high-yield stocks is among beaten down, unloved companies that regularly do well, but currently are out of favour. As their share price goes down, their yields go up. Later as they recover, the yield may come down, but now the share price and dividend payments should be on the rise.

Here is one blue-chip stock paying a high yield that could help you double your portfolio in seven years.

—  Coca-Cola Amatil Ltd (ASX: CCL) is popular among value investors who like strong brand name companies. As the exclusive bottler and distributor of Coca-Cola drinks in Australia and five other nearby countries, it has a good competitive advantage.

However, business has been off and earnings have fallen. This situation isn’t permanent, but right now the yield stands at a very hefty 5.2% partially franked.

The company is starting a business restructuring, which is usually good for earnings because inefficient work and unneeded costs are cut, with the savings falling to the bottom line.

The share price rallies

Then suddenly last week Coca-Cola Amatil announced that The Coca-Cola Company (NYSE: KO) will inject about $500 million into the company’s Indonesian business to bolster the restructuring for a 29.4% stake in it. (The Coca-Cola Company is already Coca-Cola Amatil’s biggest shareholder.)

Since the announcement, Coca-Cola Amatil’s share price jumped up about 10.2% to $9.40. That could have covered almost all our 10.3% return goal for the first year.

There’s still a lot of work ahead for the company, but this could be the start of the turnaround. I would suggest long-term investors start a position and add to it along the way as the stock story improves. That’s how time does the investing work for you.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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