Getting Paid to Wait
The market’s been ridiculous this year. It plummeted to start the year. And it’s been so choppy since, we’re barely back to where we were in January before it tanked.
But some investors have kept watching their gains quietly pile up. Some investors are still beating the heck out of the market... even thought their investments aren’t moving that much.
They’re not some secret group of uber-wealthy venture capitalists or private equity investors, either. They’re regular folks like you and me.
They’ve just made the decision to invest in dividend-paying stocks instead of chasing the casino-like thrill of momentum stocks.
And their decision is paying off big time for them...
The Best Investors Are Income Investors
Sure, when you look back at successful investors, there are a few who have made their fortunes by making massive bets on risky businesses.
But the great majority got to where they are by saving, spending wisely, and investing in dividend-paying stocks.
Donald Trump is known for real estate and many failed businesses like Trump Air and Trump Vodka. But his most successful investments have been in the stock market.
Back in 2011, real estate was still slowly recovering from the collapse a few years prior. So The Donald turned to the stock market. He invested $70 million in about 45 companies.
But he wasn’t going to take any chances making risky bets. This was his money. Trump Air and Trump Vodka were funded by investors.
So, he picked blue chip stocks with solid and growing dividend payments. Stocks like IBM, Bank of America, Verizon, and Boeing.
Those don’t sound like momentum stocks to me. Yet, within a couple of years, Mr. Trump more than doubled his money.
And he’s not the only one who’s smitten with dividends...
Famed Shark Tank celebrity investors Mark Cuban and Kevin O’Leary can’t get enough. Kevin went as far as starting an ETF company called O’Shares that focuses on dividend and dividend growth stocks.
And Mark told would-be investors that “non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.”
Cuban and O’Leary make most of their money through venture capital, but when they do invest in stocks, dividends are a requirement, not a bonus.
Warren Buffett urges investors to invest in dividend-paying stocks and does so himself.
Famed Texas oil billionaire T. Boone Pickens despises stock buybacks.
He says, “If a company has the money to buy their stock back, then they should take that and increase the dividends. Send it back to the stockholder.”
Even John D. Rockefeller found joy in dividend payments. He was once heard saying that the only thing that gave him pleasure was “to see [his] dividends coming in.”
But strong endorsements shouldn’t be enough to sway you to invest your hard-earned money. So I’m going to give you some strong math to back up that praise...
I’m Lovin’ It
McDonald’s is a great example of an investment that would have made you rich beyond your wildest dreams... and without the wild swings of momentum stocks like Facebook and Google.
Let’s go back 30 years to 1988. $100,000 would have bought 2,173 shares of McDonald’s at $46. Today, if you reinvested those dividends, you’d have 31,877 shares of McDonald’s worth $4,964,266 — and you’d have collected $118,028 in dividend payments last year alone.
McDonald’s was hardly an unknown stock at the time, and you still could have made enough in 30 years to live a pretty good life.
But what about other companies?
Now, say you bought Starbucks when it went public in 1992. Shares were $17, so $100,000 would have gotten you 5,882 shares.
Starbucks has split its shares six times over the last 26 years — and it just started paying a dividend in 2010.
Today, if you had reinvested those dividends, your 5,882 shares would have grown to 309,623 shares...
That $100,000 would be worth $15,979,670! Not only that, but you’d be raking in $335,900 in dividends per year.
So, after 26 years, you’re getting paid over 200% more in dividends alone than you invested to begin with!
Real People Making Real Money
But don’t just take my hypothetical examples. That’s back-testing. I didn’t make those trades.
But I can tell you about real people — not Wall Street bigwigs — who’ve made millions just by investing in dividend stocks and reinvesting those dividends back into the stock.
Anne Schreiber was an IRS auditor for 23 years. She never made more than $3,150 a year. But at the time of her death in 1992, she passed on a $22 million fortune.
And she started it all off with a simple $5,000 investment. She collected dividends and reinvested them in brand names she knew like Coke and Pepsi. She lived within her means. And she became a multimillionaire. All through the power of dividends and compounding.
Then there’s Grace Groner. She turned $180 into $7 million. And she did that by investing in three shares of the company she worked for as a receptionist and reinvesting the dividends. She never sold her shares, but she never bought more, either.
There are countless more stories like theirs — regular people earning regular income making millions of dollars by investing in dividend-paying companies.
Sure, they’re boring. But boring translates to stable. And stable translates to profitable. And isn’t that why we’re all here, to make profits?
Finding the Best Dividends
One mistake investors make when starting dividend portfolios is looking for high yields. But that can be disastrous. And at best, it’s only moderately profitable.
High yields can mean a company is going to cut its payment. They might be unsustainable. But even if the company manages to keep paying them, they won’t boost your profits as much as you think.
If you put $5,000 into a $50 stock that pays 8% a year and you held it for 20 years, your investment would be worth $24,377. That’s a 487% gain.
Not bad... but it could be a lot better.
That same $5K in a stock that pays just 3% — but grows that payment at 20% a year — would be worth $4,055,388 after 20 years. That’s a phenomenal 81,327% gain.
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It contains full details on why dividends are an amazing tool for growing your wealth.
So, you’ve got to look for companies that can grow their dividends.
And I’ve got a checklist I follow that I’ll share with you here to make it even easier to win:
ENTERPRISE VALUE is the total valuation of a company. It combines the value of all stock outstanding (market capitalization), debt, and preferred shares, minus total cash and cash equivalents. Look for stocks whose market caps are lower than their enterprise values.
OPERATING CASH FLOW is a better metric for a dividend stock than earnings per share (EPS). Cash flow is what pays the bills. It is the cash that comes into the company after it collects revenues from sales and pays off its suppliers.
LEVERED FREE CASH FLOW is the amount of cash available after interest payments on debt are made. A company with a small amount of debt will only have to spend a small amount of money on interest payments. That means there’s more money to send to shareholders.
CASH ON HAND is an excellent indicator of a dividend’s sustainability. Having plenty of cash means the company can sustain short-term swings in the business/economic cycle. A high level of cash is also a good indication that you will be treated to regular dividend hikes.
THE PAYOUT RATIO tells us what portion of the profit is being returned to investors. A payout ratio over 100% indicates the company is paying out more money to shareholders than it is making. That can’t last forever. As a rule of thumb, look for companies whose payout ratio is 60% or below.
The Next Big Dividend Grower
So, I’ve told you how great dividends are. I’ve given you famous and wildly successful investors’ takes on the profit potential of dividends.
I’ve shown you real examples of real people who used dividends — and dividends alone — to become multimillionaires.
I’ve even given you a cheat sheet, so to speak, to help you pick the best dividend stocks.
What more could I possibly offer to help you get on your way to millions in the bank like Anne and Grace?
Well, I happen to run an investment service called The Wealth Advisory. Actually, I’m the assistant editor. My colleague, Briton Ryle, is the head honcho. But I like to think of us more as partners.
Anyway, we focus on just these kinds of investments. And we’ve helped our readers score massive profits from the same kind of dividend growth stocks I’ve been talking about.
We just closed a position in Starbucks for nearly 200% profits. We banked triple-digits from Boeing, too.
We’re sitting on numerous triple-digit gains in our current portfolio.
And we’ve just recently uncovered what could become the next McDonald’s-like dividend growth story.
You see, this company is in a completely different industry. In fact, it’s in a brand-new industry. But one with the potential to generate $45 to $50 billion a year.
And it’s the only company of its kind in that industry. Plus, the resource it provides is 100% necessary to keep the industry running and growing.
But what’s best about this company is the way it’s set up to reward shareholders.
You see, it’s got a special deal with the government. It gets special tax treatment if (and only if) it shares 90% of its pre-tax profits with investors.
So, it has to pay a massive dividend already.
And as the industry grows and this company starts raking in even more revenue, it’ll have even more profits. And those are profits it MUST share.
We’re talking about millions that have already been paid out and BILLIONS more to come.
So get a head start on your dividend growth portfolio, and click here for all the details.
Every day you delay is a day you could be building your multimillion-dollar fortune.
Don’t wait any longer. Trust me. Your future self will thank you.
To your wealth,
After graduating Cum Laude in finance and economics, Jason analyzed complex projects and budgets for the U.S. Army. Then, at Morgan Stanley, he led the assistants' team for the North American repo sales desk, responsible for hundreds of multibillion-dollar trades every day. Jason is the assistant editor for The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.
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