The Remarkable True Story of a $146,194-Per-Year Income Portfolio

Stop me if you've heard this one before: Thirty years ago, if you'd bought $1,000 worth of Johnson & Johnson (NYSE: JNJ  ) and reinvested the dividends, you'd be sitting on more than $51,000 today.

Alternately, if you'd invested $1,000 in Altria (NYSE: MO  ) in 1981 and held steady to now, your investment would be up more than 5,200% and you'd be receiving large dividend checks every quarter.

I could go on, but I'll spare you. Instead, let's look at a real-life dividend success story.

Meet Hayford Peirce
Hayford is a science-fiction writer by trade -- although he told me he thinks of himself more as an investor "because that's what I do." After inheriting family assets at a young age, he took an interest in managing his own portfolio.

Not merely as an intellectual exercise, though. "The whole point of owning stocks was to live on the dividends," Hayford told me. Though The Future for Investors author Jeremy Siegel labeled dividends "bear market protectors and return accelerators" because of the power of reinvesting them, Hayford needed the quarterly checks: "Reinvesting is just fantastic but I can't afford to do it."

A peek inside the portfolio
Hayford holds a very concentrated collection of high-yielders. All told, he currently owns 14 total investments, and by his precise estimates, these 14 investments will spin off $146,194 in 2011:

  • Three common stocks (Altria, J&J, Philip Morris International (NYSE: PM  ) )
  • Nine master limited partnerships (Alliance Resources, Enbridge Energy, Energy Transfer, Enterprise Products, Inergy, Kinder Morgan, ONEOK Partners, Plains All American, and Suburban Propane)
  • One bond
  • One annuity

His Altria investment is an incredible story. Hayford began buying shares of the tobacco company back in 1987, when it was quite a bit more than just a tobacco company. Over the years, he kept buying more (in '88, '91, '96, and '97), and eventually accumulated 11,000 shares of Altria (then known by the more familiar Philip Morris name). "Every time there was a panic in the market about Philip Morris, it would go from $70 down to $20 because of a smoking case, I would go out and I'd buy some more." Through spinoffs, his original 11,000 shares of Altria stock turned into an astounding 11,000 shares of Altria, 7,000 shares of Kraft, and 11,000 shares of Philip Morris International.

He still owns Altria and Philip Morris International, but sold Kraft. "At one point my basis for everything, including the Kraft [spinoff], was about $200,000 and it was worth about $1.25 million."

Not bad for a company famously dogged by litigation fears over the past three decades.

30% yields
That Altria investment is spinning off incredible "effective yields" -- measuring today's dividend checks against the original cost basis, rather than the current share price. Hayford's getting a 37% yield on Altria and a 28% yield on Philip Morris International.

That's by design. About half of the $146,194 in investment income will come from Hayford's annuity and the lone bond. The other half will come from a very deliberate investment process in dividend stocks. On a 1995 trip to Tahiti (where he lived for 25 years), Hayford sat down with a legal pad, pen, and his collection of stock tickers:

I was looking over my portfolio. And say there were 12, 14 companies in it, and 8 of them were blue chips like GE and Coke and Johnson & Johnson. … I said, "These suckers are bringing in $14,200 in income this year. Let's see what would happen if we just increased that dividend by 10% every year for 30 years."

Upon returning to the States, he transferred his legal pad scribblings to a series of spreadsheets, and the long-term vision for these 12-14 dividend stocks took hold. His stated goal was to increase his annual investment income from $14,200 in 1995 to $250,000 in 2025. "Up until a year and a half ago, I was ahead."

Then the financial crisis hit, former widow-and-orphan stocks like GE and Bank of America (both owned by Hayford in '08) slashed their dividends, and even the best-laid of plans went to mush. Hayford tilted his dividend portfolio toward high-yielding MLPs.

The importance of a roadmap
When he sat down with that legal pad in Tahiti, Hayford was 53 years old. He devised his plan, he said, out of sheer necessity: "Just about everyone in my family except my poor father lives forever in good health, and I said I fully expect to live to be 100 years old."

If you think every retiree or near-retiree outlines such a game plan, think again. The 2011 Retirement Confidence Survey, administered by the Employee Benefits Research Institute, found that many folks simply don't plan for retirement. Forty-two percent of respondents, in fact, said they determined their retirement savings needs "by guessing."

As my colleague, the retirement expert Robert Brokamp, is fond of saying, you can't get to where you want to go if you don't know how to get there. 

Takeaways
Hayford's journey would be tough to emulate -- he grew up in a wealthy family and inherited assets upon his father's death (Hayford was just 4 years old). Before he self-directed the portfolio years later, the Fiduciary Trust Company ran things. Also, he was candid about how many "major mistakes" he's made over the course of his more than four decades of investing.

Still, Hayford's a shining example of three crucial investment principles. I'll let him do the talking:

  • Setting goals. "What it really comes down to is, What are your goals in investing? Everyone has different goals, and my goal is to not go to work and to live on my dividends."
  • Discipline. "I still have that 30-year spreadsheet that I update every year and I plug in all the figures, and it's just like what they say about compound interest -- it's magic, it works."
  • Dividends. "I would love to just have 10 stocks that I bought 30 years ago and never had to sell, as long as they kept raising their dividends."

Living off $146,149 in investment income may sound like a long putt for most, but those three simple and straightforward steps will guide you right.

For additional help, Fool analysts have uncovered 13 dividend stocks and packaged them in a single free report. To get your free copy of "13 High-Yielding Stocks to Buy Today," click here right now.

Johnson & Johnson and Coca-Cola are Motley Fool Inside Value selections. Philip Morris International is a Global Gains pick. Alliance Resource, Enterprise Products, J&J, Coca-Cola, and ONEOK Partners are Income Investor picks. Motley Fool Options has recommended a diagonal call position on J&J. The Fool owns shares of Altria Group, Bank of America, Coca-Cola, Johnson & Johnson, and Philip Morris International. Motley Fool Alpha LLC owns shares of Johnson & Johnson. 

Fool.com managing editor Brian Richards does not own shares of any companies mentioned. The Motley Fool has a disclosure policy.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 18, 2011, at 11:53 AM, ctharwick wrote:

    Most of us don't have the luxury of an enheritance.We have to do it the old fasion way,and earn it.AND THERE IS NOTHING FOOLISH ABOUT THAT.

  • Report this Comment On April 18, 2011, at 12:35 PM, TMFBrich wrote:

    @ctharwick,

    Right, I acknowledge as much toward the end of the piece. Nonetheless, Hayford's tale of setting goals, being disciplined to achieve those goals, and focusing on income-producing investments is instructive for any investor.

    Best,

    Brian Richards

  • Report this Comment On April 18, 2011, at 5:23 PM, abitnaive101 wrote:

    This was good, but it would be great to hear a similar story from someone who did not have the benefit of the early inheritance.

    Thanks.

  • Report this Comment On April 18, 2011, at 5:39 PM, reely wrote:

    What is the portfolio total value that is providing this income?

  • Report this Comment On April 18, 2011, at 6:10 PM, maccdw wrote:

    You ignore Lady Luck as a factor. We’ll never know how many people had the early discipline and forethought to do something very similar, but they placed their long-ago bets on stalwarts such as Lehman Bros., WorldCom, Enron, BP, etc. All were fine and strong firms—at one time—yet each fell apart (or nearly so, in the recent case of BP).

  • Report this Comment On April 18, 2011, at 6:14 PM, GalinAZ wrote:

    How typically arrogant, when the vast majority of the U.S. lives on less than $50,000 per year.

  • Report this Comment On April 18, 2011, at 6:34 PM, z3k3s7 wrote:

    Not arrogant. Not a silver spoon in the mouth. And certainly no father in the house. So I am going to live 2x's that before I croak.

  • Report this Comment On April 18, 2011, at 6:37 PM, OPTIONNUT wrote:

    I reiterate the following....hind sight is history...and not a real big interest.....I/We are interested in where our future stock picks are going! Forward Advice Motley Men!

  • Report this Comment On April 18, 2011, at 6:47 PM, TMFHousel wrote:

    Great article, Brian.

  • Report this Comment On April 18, 2011, at 6:51 PM, TMFRoyal wrote:

    Great story. Thanks, Brian.

  • Report this Comment On April 18, 2011, at 6:57 PM, Sunny7039 wrote:

    This isn't a "remarkable story," it is pure propaganda. We have no numbers -- neither what he started with as an inheritance, nor when, nor what his annual return was over this unusually brutal period in the stock market. How can we take any lesson from this? On top of it, he invested heavily in tobacco, basically betting on the outcome of court cases. A lot of people will invest in what may not be thought of as the most socially conscious companies,of course, but they will not invest in chemical companies that pollute the environment without conscience, nor will they invest in tobacco -- or in makers of unmanned drones, for that matter.

    If you don't give us stories about people who invest responsibly and make a decent retirement income without inheriting it, you have taught us nothing. Except perhaps that it really isn't possible for the ordinary person after all. That is what we suspect anyway, so that's nothing new, either.

  • Report this Comment On April 18, 2011, at 7:18 PM, midnightmoney wrote:

    must say that I'm torn here. You give us good advice, but you've basically taken a really sexy model and just put nice clothes on him--the model being the money the man inherited and the clothes being sound investment decisions. We can all go out and buy nice clothes, but the body's a different story. Give us a streamline-challenged individual on low wages and you'll come out with an entirely different retirement scenario. Hayford's is a feel-good story when it's framed as you have framed it, but could you write the same story about an investor who didn't have phat capital to get those dividends doing the tricks he wanted them to to begin with? If you're investing in mlps, the answer is a definite no.

  • Report this Comment On April 18, 2011, at 7:33 PM, Seano67 wrote:

    Very interesting article, and the power of compounding dividends surely can be a beautiful thing. I'd like to read more of the same, however as others have stated, maybe more along the lines of people who didn't start out with such a large inheritance, because that's obviously an inherently huge advantage in and of itself, and is an advantage that most people will not get to share in.

    Still though, the lessons apply and are the same whether you've got a big inheritance or just a weekly paycheck with which to work, focus, mental discipline, having a clear thesis, strategy and/or goals for your investing and investments, and the importance of dividends to a portfolio, particularly when geared towards retirement purposes.

    I could tell you a heck of a story about my Grandmother, who was a high school English teacher who took her retirement back in the mid 1950's and proceeded to become basically an amateur 'professional' investor back then, I mean that's all she did for 50+ years. She had a small nest egg and a small inheritance from the death of her husband with which to start her adventures in the stock market, and along with her teacher's pension she just took that relatively paltry bit of money and began investing as a buy and hold investor all the way. She mainly invested in banks,/financials/insurance and big blue chippers ala Coca Cola, GE, AT&T along with a multitude of others, and at the time she passed away 6 years ago (at 102 years of age), she had made herself into a multi-millionaire solely by virtue of her investing prowess and discipline. When it came to investing, she was just as sharp as could possibly be and she was a far, far, far better investor than I will EVER be, but that's who I try and emulate as an investor, ya know. What a role model to have, and to see personally through her the incredible power of compounding dividends over a period of decades, it's just like WOW! Good stuff....

  • Report this Comment On April 18, 2011, at 7:43 PM, midnightmoney wrote:

    seano67-

    great post

  • Report this Comment On April 18, 2011, at 8:20 PM, doublearon00 wrote:

    I hear nothing but haters on here. Listen, Motley Fool guys are just sharing a story. I am sure they are not assuming most of us are relying on an inheritance. Hence the reason why the have many different writers that cater to all the different levels of investors.

    But it is somewhat inspirational that a guy who did inherit some money didn't waste it up his nose or on prostitutes. So, whether the story is true or not, it is still nice to see that some people still are responsible. Especially those damn greedy rich people.

  • Report this Comment On April 18, 2011, at 8:21 PM, neuRx1 wrote:

    Those who do not start out with an inheritance have only one option and that is to pay yourself first, save diligently and with discipline. Then and only then do different strategies such as laid out in this article make sense.

  • Report this Comment On April 18, 2011, at 8:33 PM, Pahio wrote:

    I'm not sure why all the nay sayers here. Dividends on quality stocks are a great benefit...and it you can capitalize by reinvesting...KUDOS! We plan on doing the same thing...but to a lesser extent. We started with NOTHING, 30 years ago...and wisely invested pretty much along similar avenues. Some speculation along the way to increase the investment pool, then into dividend stocks. We've held MO (now PM and MO), JNJ, GE, PG, and others for 30 years. I see this as a good thing.

  • Report this Comment On April 18, 2011, at 8:57 PM, SUPERMANSTOCKS wrote:

    Dividends are nice! Look at DHY, 10% per share per month.

  • Report this Comment On April 18, 2011, at 9:26 PM, peters46 wrote:

    What got me into investing in stocks in the first place were stories (true) of people like seano67's grandmother. One was of a retired librarian (investing her whole life) and leaving multimillions to some charity when she died. Another involved a laborer (who happened to live in a shack near an open dump) and left over $5,000,000. From the stories, they invested in blue chips, and dividend payers, and one also happened onto one of the 100-plus baggers. For both of them it was mostly doing due diligence in depth, living at their non-investing income level, saving. And this was back in the 60s and 80s. It can be done, has been done.

  • Report this Comment On April 19, 2011, at 12:04 AM, Alfredodos wrote:

    Dividends can be overrated. I recently sold Pfizer after holding it for 12 years. Great dividend but after cashing out recently at $20.40 I still lost money (-$800). A lousy long term great dividend investment....

  • Report this Comment On April 19, 2011, at 12:31 AM, TMFBrich wrote:

    Seano67,

    Thanks for the comment. Great post.

    Best regards,

    Brian Richards

  • Report this Comment On April 19, 2011, at 3:26 AM, shoemaker17 wrote:

    great article. When I graduated in May 2008, I moved back home, saving money and working as an engineer up the street. when the market collapsed, thats when I took the risk, i started pouring EVERYTHING into stocks. My top holdings now are GE, PM, MO, EXC, KO, BP, ABT, JNJ, and some other dividend payers. Right now, I'm making about 10K in my regular account just from the dividends. I know it is not a sure thing, but I have confidence that this amount of income will grow over the years, much faster than any raise. I just wished I knew about this sooner, I would have had a job in high school rather than playing video games and raiding the liquor cabinet.

  • Report this Comment On April 19, 2011, at 5:50 AM, nivekluap wrote:

    Brian, someone wants a more recent story about an investor who didn't iinherit the money they started with and is "on the way to prosperity".

    Looking at my records indicates I held 200 shares of GLNG in Feb. '09 ($1000 value- total portfolio was $21,396). There was blood in the streets and the dividend had been slashed because it was hard to borrow money at the time. I figured if the world didn't come to an end, they would reinstate the dividend sooner or later. Peter Lynch says in his books not to sell and even add to a position if the story keeps getting better. I kept adding a little here and there until the dividend was reinstated in Jan, 2010. I sold off other stocks that had done well and added to my position until I had 3567 shares....avg. price I paid was $8.81. Then Japan happened and the price went way out out of orbit. I sold 500 shares and used the proceeds to buy more F, CCJ, DNN, and NUE. because they are on sale right now IMHO. I'll reinvest my dividends in GLNG, but no new money, because it is 70% of the portfolio now.

    After taking some proftis from GLNG my avg.price per share is $5.96. Around a 20% dividend at the currrent level.

    By the way, this all happened within the confines of a Roth IRA. My wife and I grossed 75K last year. Two kids in college who pay for most of it.

    Am I bragging? Maybe a little,but the main point is that it CAN be done. The Fool is here to educate, amuse, and encourage. This blurb of mine is to encourage others to keep on keeping on.

    Happy investing!

    KD

  • Report this Comment On April 19, 2011, at 7:21 AM, marc5477 wrote:

    There is something very wrong with your math. If you purchased just 200 shares ($325) of JNJ in 1980 and reinvested in an IRA you would currently hold about18490. So if you actually had $1000 invested you would have started with about 3x that amount. Thus you would have about 55,470 * $2.16 = $119,815 per year. Your stock would be worth about $3.3 million.

    MO would still have been better but its all hind sight and no one knows the future but I would bet that JNJ will outlast MO in the long run.

    Someone I knew went from $60k in late 2008 to a current portfolio that pays $350k a year. No penny stocks involved. He did it initially with REIT preferred shares that sold for $3 while payed $2 a year. He reinvested the dividends and bought banks during the huge dip in '09 and the rest is history.

    It can be done if you have a strong background in math, business and history.

  • Report this Comment On April 19, 2011, at 8:32 AM, RGGrass wrote:

    I found reading this interesting and inspirational.

    My Father worked for Standard Oil of Indiana Whiting Refinery from the end of WWII until 1980 when he took an early retirement buyout. His stock market experience was limited to Standard Oil stock which he purchased through an ESOP. These programs require dividend reinvestment and as he was single when he started he maxed out on buying. He died in 1998 and never did touch the buyout money, he and my stepmother lived off of the investments they made from the ESOP money. He did sell all of the stock after he left the company saying that he did not like being all in with one company.

    Stepmother is now very very very comfortable and will leave millions to the four of us children, but until then she sends each of us checks every year from the buyout money which was put into an IRA back in 1980. That money goes to my investments until I retire, just a nice boost.

    All this from a union job and slow but steady investing.

  • Report this Comment On April 19, 2011, at 9:57 AM, wrenchbender57 wrote:

    Good article but we need some examples that we can emulate. Also, some real numbers to do along with the other data would be great. What did he start with? How much is his portfolio worth now?

    One thing that I see wrong in this example is a lack of diversification. A friend of mine had his investments mainly in two stocks. GM and WAMUQ. Dividends were great until both stocks went to zero and he lost it all. Might have been bonds rather than stocks now that I think about it. But the end of the story is the same. Too many eggs in too few baskets can be a disaster waiting to happen.

  • Report this Comment On April 19, 2011, at 10:02 AM, wrenchbender57 wrote:

    SUPERMAN.. nice ad but the payout from DHY is 10% a year from what I found. Good return but not 10% per month as you seem to indicate. Though they may very well pay a portion of that each month.

    The revenue from this fund comes from junk bonds so could be a house of cards. Though it looks like they have done OK in the past. Might be OK for a portion of a diversified portfolio but I would not put too much into a fund like this.

  • Report this Comment On April 19, 2011, at 10:14 AM, 7351jay wrote:

    Interesting article but you left out a few things. How large is the portfolio that generates this income.

  • Report this Comment On April 19, 2011, at 11:04 AM, BB1162 wrote:

    Hayford Peirce deserves credit for being an astute investor but if I had a chance to have a beer with him I would ask him how he sleeps at night when living off the profits of a company that sells poison to the public. Each year, cigarettes kill more people than are killed in all of the wars, earthquakes, and other calamaties that befall this planet's residents. Has he even known anyone who died after six months of horrible suffering with lung cancer? Does he have friends who drag oxygen tanks around because Phillip Morris cigarettes gave them empyhsema?

    I'd rather be dirt poor than live off tobacco profits. I would just as soon invest in cocaine farming and big drug cartels as live off of tobacco profits.

  • Report this Comment On April 19, 2011, at 11:09 AM, SteveoCFP wrote:

    Although there can be drawn from this article some rudimentary investing advice the article falls flat on its face because of the lack of disclosure of the amount of money involved in generating $146,194. This is like those guys marketing trading systems where they claim to have made $3 million during the last market crash. Big deal? Tell me what you started with so I can understand the percentage return. This is common among individual investors, with whom I have twenty years experience advising and investment money. They speak in dollar terms rather than percentage terms. So again, big deal, $146,194. If the guy has $10 million he's generating less than 1.5% cash flow. The author likely left that information out intentionally because it would reduce or eliminate the perceived benefit of the message of the article.

  • Report this Comment On April 19, 2011, at 1:23 PM, atlantanewbie wrote:

    Thanks very much indeed for publishing such a wonderfully thought provoking story, which I have pondered over for the last 24 hours or so. I'm currently building a portfolio of dividend-paying blue chip stocks, ones I pick primarily from the Dow 30 because I like the relative security of such gigantic companies, and until now have simply thought of the dividends as a way of purchasing more shares. I never really considered how rising dividends might someday actually work out to produce a worthwhile income stream, and I am very grateful to you for helping me improve the mental picture I have for what my portfolio really ought to be about.

    Thanks!

  • Report this Comment On April 19, 2011, at 1:38 PM, TMFDitty wrote:

    Great story, Brian. Thanks.

  • Report this Comment On April 19, 2011, at 1:41 PM, davedallas wrote:

    This is a great way to invest if you can compound the dividend stream tax free until you need it.

    Another great investment is US small cap value index funds. History has shown that small cap value produces the best returns over most time periods with no greater volatility than US equities as a whole.

    So set up a couple of portfolios with tax free compounding being your key goal.

  • Report this Comment On April 19, 2011, at 2:16 PM, tahitiguy wrote:

    To SteveoCFP and all the others:

    In 1995 I owned about 25 different stocks and bonds. Some of them were high-yield but slow-growth. Others were high-growth but low-yield.

    As I told Brian, I decided to create a 30-year plan that had NOTHING but low-yield but fast-growing dividend stocks in it. And I created a 30-year extrapolation for these stocks and ONLY those stocks.

    Of my 25 stocks and bonds, I chose SEVEN that met my criteria: they weren't paying very much relative to the market BUT they were increasing their dividends EVERY YEAR.

    These seven stocks were Coca-Cola, GE, J&J, Kellogg, Merck, Pfizer, and Philip Morris.

    In 1995 they were paying me an income of about $14,250. The portfolio of ONLY these stocks was worth about $638,000. My annual return, therefore, was only 2.2% of these stocks.

    I hoped, over 30 years, to see this income grow dramatically.

    And it has.

    From those ORIGINAL stocks I had an income of something over $64,000 in 2010. I hope to have an income from them of $68,000 in 2011.

    I do not own ALL of the original stocks -- some I have sold and replaced. But if I sold, say, $50,000 of the original ones, I only bought, for my calculations of the 30-year plan, a replacement $50,000 worth of stocks.

    So, of those original seven stocks, today I own only two, PM and J&J, but have another 10 or so that have replaced the ones I sold.

    As of today, the stocks that compose my 30-year plan are worth $1,376,954.

    I have in no way mingled apples and oranges along the way. I had $638,012 invested in my apples in 1995 and that portfolio was paying me $14,000. Today those apples have increased in value to one mill three and they are paying me $64,000. And someday, I hope, they will be paying me much more than that.

    Sure, I was lucky enough to have an inheritance to get started. But I've known a number of people who had much bigger inheritances than I ever did who managed to go through them within a few years....

  • Report this Comment On April 19, 2011, at 4:00 PM, TMFBrich wrote:

    Thanks for posting (and clarifying), Hayford!

    Best,

    Brian

  • Report this Comment On April 19, 2011, at 6:13 PM, Sunny7039 wrote:

    Since when is it "hateful" to ask for precise numbers, and time frames, and rates of return -- especially after a down year? Since when is it "hateful" to ask precisely how one rebuilds?

    If you don't even know those things, you are not an investor. I was going to say you are a gambler, but that's not fair to gamblers Good gamblers do know the math.

    One more thing -- maybe it's unusual for some people to be disciplined with money, but it's not unusual for everyone. (I frankly don't have a problem with it, which was thanks to Mom and Dad, of course.) If you already have a pension that is sufficient to live on, it is much, much easier to build a portfolio going forward. It's not just a matter of personal discipline. Food and medicine do cost money, and the demand curve is relatively inelastic, you know?

    As for tahitiguy, you claim to have made this money not during one, or two, but three crashes. You say you "bought and sold." Fine. And when was that? What stocks? How much? You must know that people who have never so much as dreamt of touching their 401(k), and who have already paid off their mortgages, are still seeing serious losses.

    What I don't like is the implication that "anyone can do this," and worse yet, that anyone can do this after reading an "inspirational story." If it were true that anyone can do it, then a portfolio of over $500K in financial assets, no mortgage, and no debts would not put you WELL within the top 10% for the whole country. (And if you don't believe that, you must not read Federal Reserve Board data very often!)

    I thought we were all more sophisticated by now. At the very least, you do need critical thinking, sound intuition, and math. And I don't know about you, but motivational speakers is not what I need in 2011. I want to run all the numbers and study them intently. You know, like a grownup.

  • Report this Comment On April 19, 2011, at 7:17 PM, tahitiguy wrote:

    Sunnyguy, I don't know why you think I would "claim" any of this -- I have better things to do with my time than make up stories for an Internet blog. I have sufficient self-esteem not to be trying to impress people who read the Motley Fool....

    When I said I "bought and sold" over the years, I didn't mean that I was being a "trader".

    I started out with SEVEN stocks. Several years later I sold Kellogg (it had stopped raising its dividend) and bought Wisconsin Energy to replace it. Several years after that I got nervous about WE and sold it for Xcel. Xcel tanked and I replaced it with KinderMorgan Partnerships, one of my smarter moves.

    Those are the only things I did for 15 years. Then, last winter, I sold the rest of my blue chips like GE and Pfizer that were no longer blue chips and replaced them *entirely* with 1 convertible bond and eight Master Limited Partnerships.

    So, in 16 years I've bought and sold about 16 items -- is that enough information for you? Crashes and market timing have NOTHING to do with it -- I *always* sell at market and buy at market, never trying to *time* the market, which is a fool's game.

    What more do you want? Photocopies of my brokerage records and my Social Security number?

  • Report this Comment On April 19, 2011, at 7:28 PM, muddlinthrough wrote:

    "...but if I had a chance to have a beer with him I would ask him how he sleeps at night when living off the profits of a company that sells poison to the public..."

    I'd sleep pretty well. As Dad always said, "I didn't take the world to raise." The moralists who go, 'you're making profits off of someone else's weaknesses' usually don't have a problem with owning drug companies ('wait! They make money off of people's illnesses!', etc.)

    You want to save the world, or you want to own stocks. Sierra Club & Greenpeace have websites. I find it amusing that the 'power to the people' folks want to show up and slander capitalism, sneering at someone else's success.

    And, yes, I'm a hypocrite...I teach a Sunday School class, I argue the devil's advocate side both for and against evolution and religion.

    I know what I think--and I see nothing wrong with having a legalized monopoly on a highly addictive substance. Forcing people to buy the product and jailing them if they didn't...that's bad, coercive business. Wait...that's what happens every time I pay taxes.

  • Report this Comment On April 19, 2011, at 7:40 PM, tahitiguy wrote:

    Sunny, I just checked, and the Dow-Jones was at 5,882 back on July 1, 1995, when I started my 30-year plan. Today it closed at 12,266.

    That means it has climbed 208% since then.

    I started out with $638,000, and if it had merely tracked the Dow-Jones, it would have become $1,330,045.

    Guess what? I said earlier that those seven stocks (or their successors) were now worth $1,376,954.

    Which means that I'm about 1% smarter, or, more likely, luckier, than if I had just invested that money into a Dow-Jones tracking fund and gone to sleep for 16 years.

    So I don't think that any major claims are being made here, either by me, or by Brian on my behalf. The only claim that is being made is that if you buy income-producing stocks that increase their dividends *every* year, and hold on to them long enough, your income will eventually be *far* greater than it was when you started....

  • Report this Comment On April 19, 2011, at 8:30 PM, Sunny7039 wrote:

    Wonderful! You are talking numbers. Because that is exactly what I came back to talk about. My mailbox has been full of flyers making these claims for at least the last 20 years, and frankly, I'm tired of it.

    According to Modern Portfolio Theory, the sums you are talking about are much too small to generate $146,194 per year. In order to do that reliably over long periods of time, you need a balanced portfolio worth between $2.92 and $3.65 million. Now, if you are relying solely on income-producing stocks to generate this income, then your beta is probably higher, so you either need MORE principal (i.e., more than $3.65 million), or you need a significant cash cushion (between 18 and 36 months of actual living expenses), in order to avoid having to sell an asset at distressed prices. In fact, most advisors will tell you that anyone who is relying solely on a portfolio for their livelihood should have significant cash and cash equivalents. Thank goodness most people have additional sources of income.

    So yes, major claims are being made here.

    Especially if you managed to pick exactly the stocks that didn't cut dividends at any point during this period, but only increased them. And, of course, you are not mentioning what $638,000 in 1995 dollars is worth today. That has changed, too. So, what is the return in constant dollars? Because those are the ones that you use at the gas station and the grocery store.

    Also, of course, we are also assuming that nothing fundamental has changed about financial markets since 1995. This may or may not be true. Simon Johnson, for example, wouldn't agree.

    Am I saying this can't be done? No. About 3% of the country has this net worth. But that means that 85% of the top quintile does not. (And I think we would all agree that the top quintile is "successful," right?) Ah, math. So boring.

    Back to the real question. Can this be done by most people? No, not this way.

    But I'm not saying it can't be done -- I'm saying that you have to do something different, or something more. You have to start your own business, design your own product, do some serious consulting, etc., etc. You have to be more creative and more productive than what this article would lead you to believe.

    I don't know. If this is just a forum for people who have trouble saving and need a serious pep talk to motivate them, fine. I thought this was for real investors. We've already heard of compounding. But if this is still news, by all means spread the word.

  • Report this Comment On April 19, 2011, at 9:23 PM, tahitiguy wrote:

    Sunny, have you heard of Master Limited Partnerships? I bought eight of them a year and two months ago when the average yield on them was about 7.5% (up from about 14% a year earlier, when I was too chicken to buy them). Now their average yield is probably below 6%.

    That's how you get $146,000 yearly income without having $5 in capital.

    And the even *better* thing about MLPs is that the income from them is practically tax-free for the first couple of years. It's not considered income, it's considered "return on investment".

    So you can double or triple your income with them, cut your taxes to zero, and watch them increase their quarterly payments on a regular basis. Not as fast as Big MO or J&J, that's true, but a lot faster than a CD in the bank....

  • Report this Comment On April 19, 2011, at 9:24 PM, tahitiguy wrote:

    "...without having $5 million in capital" is what I meant to write in paragraph two above....

  • Report this Comment On April 19, 2011, at 9:37 PM, Sunny7039 wrote:

    Oh, this is funny -- back again, and as it turns out, I was overly optimistic.

    According to the Bureau of Labor Statistics, which has a CPI calculator (you can find it on the www.bls.gov website), $638,000 in 1995 dollars has the same buying power as $935,511.46 in 2011 dollars. I was afraid to guess more than, say, $750K, so I refrained from guessing. (And they keep telling us inflation has been low. Yikes.)

    Anyway, it means your annualized rate of return in constant dollars was around 4.7%. That is actually good for this period -- outstanding, in fact.

    Look at all the zeros so many people have racked up over the last decade, including some of the pros managing other people's money. The moral of the story is, most people cannot count on replicating this performance. It's not a character flaw or a run of bad luck. It is not possible, for most people.

    One other thing -- I don't think the DJIA is calculated in a way that allows you to assume it is directly comparable to CPI. In other words, the DJIA and current/constant dollars are two different types of measurement; different scales and methods are involved. If the DJIA were directly comparable, then if it were to fall back to around 8625, it would mean that all of the last 15 years of gains would be wiped out in real dollar terms. I don't think the Dow multiplier works that way. (Perhaps the S & P 500 or the Russell 2000 do? I don't know.) In any case, the Dow was well below 8625 in 2009. 'Member?

    If someone knows for sure how these averages work, now that would be interesting. No sexy headline, though.

  • Report this Comment On April 19, 2011, at 9:42 PM, Sunny7039 wrote:

    Where did I say $5 million in capital? Straw Man alert!

    I gave very precise numbers, based on 4 to 5% rates of return, which are higher than the average rate of return from dividends on common shares alone.

    As for MLPs, these are riskier than stocks. Modern Portfolio Theory would never advise anyone to put all of their financial assets in these. These are NOT part of the DJIA.

    I also see some equivocation here . . . figures. Anyone who sees this discussion will figure it out for themselves I am sure. So long for now.

  • Report this Comment On April 19, 2011, at 9:50 PM, TMFBrich wrote:

    @Sunny7039,

    It's clear you didn't like the article. Fair enough. Best of luck in your investing.

    -Brian Richards

  • Report this Comment On April 19, 2011, at 9:57 PM, Sunny7039 wrote:

    A final P.S.

    $146,000 is roughly 7.5% of $1.94 million, or 14% of $1.04 million. We are still in rarified air. Well under 10% of people in the US -- perhaps even under 5% -- have this amount in net financial assets to risk. That's not a model for most people to emulate -- not even for most people in the top quintile.

    And remember, we've already switched from talking about dividend-paying stocks of major components of the Dow and S&P to Master Limited Partnerships, a riskier asset class with fewer owners.

    What's with the math blindess these days? Scary! No wonder so many people took out risky mortgages.

  • Report this Comment On April 19, 2011, at 10:02 PM, tahitiguy wrote:

    One last bunch of figures that prove the basic thrust of this article:

    I own 10,980 shares of Altria and 10,980 shares of Philip Morris in all, including those that are figured in my 30-year plan.

    I bought these from 1987 through 1997, every time that their market price plunged.

    The amount I paid for them was $146,074.39. They're worth, today, about $1,130,000.

    My income, at the rate that they are paying dividends today, will be $44,798.40. But in October they will raise the dividend rate, probably, between the two of them, an average of about 10%. Which will boost their income up to about $49,000,

    Here's the key figure to mull on: the yield of the two of them at today's market is 3.96%,

    But their yield based on what I PAID for them is precisely 30.67%. Which is what, I believe, Brian originally said in his article.

    I don't care how you annualize my figures: I think that a 31% return on your investment for a single year is a pretty good one.

    If you can do better with your own investments, please go ahead....

  • Report this Comment On April 20, 2011, at 4:29 AM, extremist wrote:

    That's great. If I had a nice chunk of change and a time machine to go back a couple decades or so, I would most certainly do what this guy did.

  • Report this Comment On April 20, 2011, at 12:55 PM, FoolSolo wrote:

    I don't think it matters what your financial situation is, the principles still make sense. Read some Og Mandino, and learn how to pay yourself first. Whether you start out $100/month or $1000/month, it effectively comes down to two key factors; discipline to save versus spend, and start saving as early as you possibly can so that compounding can help you grow your investment.

    In this particular case the subject of the article inherited his seed money, he grew up in Tahiti, but the fact he was able to turn his inheritance into an income producing portfolio that will keep him living comfortably for the rest of his life is the key point. I think that is a great story and a motivation for me and others.

  • Report this Comment On April 21, 2011, at 3:27 PM, sroslu wrote:

    This was very good,however if he took that same 200,000 and invested it in apple, he would have had $7,242,752 as of today.

  • Report this Comment On April 21, 2011, at 5:35 PM, bretco wrote:

    great exchange of thoughts and counter-arguements, enlivened by Mr. Tahiti rising to Brian's defense.

    Woulda-coulda-shouda responses are so meaningless why does anyone waste their and our time ?

    If i had tomorrows ticker results today.........

    Very interesting.......

    but not very funny !

  • Report this Comment On April 21, 2011, at 9:19 PM, Happymspage wrote:

    I was defiantly surprised when my monthy

    Check sent to all of us who have a royality rights in two oil wells in eastern Wyo. there are. Now 20 of us who are involved in this family business.

    Any ways my share monthy has been increasing gradually but my monthy check sudden leaped to triple the usual amounts I was getting last year.It's now my biggest source of monthy income now.besides my monthy check in my pension.

    Richard

  • Report this Comment On April 22, 2011, at 11:05 AM, docwife wrote:

    Sean: My grandmother, a widow at age 55, did the same thing. Bought Standard Oil and other dividend arsitocrats over 40 years and died with several million in her estate. Compounding and buying companies that increased dividends did the trick. She also chose companies that are vital to the functioning of the country.

  • Report this Comment On April 22, 2011, at 12:19 PM, jc09058 wrote:

    @docwife

    Very well said about one VERY important point, "companies vital to the functioning of the country".

    Dividend paying companies who are a part of the infrastructure of the country are often the better long-term companies (I.E. AT&T).

    @Brian

    I thought it was great article and it really did have a lot of great points stated within the article and not just the three at the end.

    @tahitiguy

    Well planned and played, sir. I tip my fool's cap to you.

    Like you, tahitiguy, I have a very similar plan in progress but without inheriting monies. I started with $1500 in 2000 after being wiped out in bankruptcy and broke 6 figures last year.

    Granted slower than I wanted because of the fun and games that started in 2008. But, the last two years have allowed me to buy like crazy on wonderfully beaten down opportunities, just like during the Depression.

    It can be done, be mindful of what is going on, review all stocks quarterly, save for opportunities using dividends or reinvest. And, did I mention that I've been unemployed for the last few years too?

    If I can do it, then anyone should be able to as well.

  • Report this Comment On April 22, 2011, at 12:38 PM, jlclayton wrote:

    Tahitiguy,

    Congratulations on your success as an investor! You took what you had, created a goal and an investing plan, and made it possible to live your life the way you wanted. Regardless of whether you had an inheritance or whether you invested funds from your paycheck every week like my husband and I do, the fact is that having a plan and discipline got you to your financial goals. I appreciate you telling your story!

  • Report this Comment On April 22, 2011, at 1:52 PM, LLP4 wrote:

    I just wanted to clear the air about Modern Portfolio Theory and this article. (Re: Sonny7039).

    MPT (Markowitz) doesn't have much to do with withdraw rates on retirement funds or whether MLP's are riskier.

    It says:

    1. You can form a portfolio with less risk than the average risk of each holding (if correlation is less than 1.0)

    2. Risk cannot be diversified away totally.

    3. One's allocation to stocks (vs. bonds) should depend on their risk tolerance.

    MPT (later under William Sharpe) says that eveyone should hold the market portfolio, regardless of risk tolerance.

    I thinke Sonny 7039 may be referring to the Efficient Market Hypothesis, which says you can't systematically beat the market. Or Sharpe's CAPM, which says you can't outperform without taking more risk (i.e. Beta Risk), on average.

    Academic evidence tends to show that dividend paying stocks are typically less volatile than non-dividend-paying stocks. If these stocks also outperform (or even just match the market) then this violates the CAPM.

    Re: what most advisors will tell you.

    I don't know what most will tell you, but the better advisors will look at your entire picture, including other sources of income (e.g. Social Security income, etc.) to determine an appropriate allocation.

    Cash is currently a non-performing asset class, so you would typically be mostly invested in fixed income and stocks (see MPT). There is some debate among advisors about MLP's as they may be more like fixed income than traditional stocks.

    BTW, every retiree is relying on their portfolio for their income if you (logically) include Social Security and Pensions as an annuity-like asset.

  • Report this Comment On April 22, 2011, at 7:18 PM, mythshakr wrote:

    If I could legally invest in the other drug cartels I bet I could make way better returns. At least they are honest about not caring about their customers. And they don't have to spend megabucks bribing (contributing to) politicians to ignore the realities of nicotine vs marijuana, cocaine, opium, etc.

  • Report this Comment On April 23, 2011, at 1:03 AM, Sunny7039 wrote:

    Oh swell. Okay, you bought tobacco. A lot of tobacco.

    I am not going to lecture anyone on buying or not buying tobacco. It's not my place to criticize. And no, I'm not a blue nose who thinks tobacco is the sin of the century. Or alcohol, or erotica. My only point is that not everyone would make the same choice. For those people, your story is irrelevant.

    Second, the fact that someone did this somewhere at some time does not mean that anyone can do this, anywhere, any time. A pure logical fallacy.

    You can't build a plan on a logical fallacy. That's one thing.

    The other thing is that we all know, or should know, about "the magic" of compounding. That is precisely what sent the CPI through the roof during a period of relatively tame annual inflation. Which is also why you supposed 30% annual return is nonsense. You aren't talking constant dollars when you cite that figure as your return on money you invested decades ago. And dollars are declining in value constantly.

    The reason I'm posting is that I think a lot of people are going to get hurt in this market. That's my fear. I don't believe in puffery. It is simply not fair.

  • Report this Comment On April 23, 2011, at 3:40 PM, sunnypt wrote:

    @sunny7039 - the best thing about your comments were that they helped get us more info from the source but I dont understand your anger.

    Brian - this is a great article

    @tahitiguy - thanks for sharing that info with us.

    I too am a dividend investor and spent too many years listening to well meaning and well compensated financial planners who did nothing but let me stay working. I maxed out my savings every year for over 25 years saving on avg probably 20,000 a year and got nowhere. I bought every stupid get money quick idea. BRE-X, the internet in 2000, currency trading, Labour Sponsored Funds (a Canadian pile of crap that gave you a tax credit and paid the planner well), every hot mutual fund, etc. I only wish I had pursued dividends from the beginning.

    The light finally turned on when I compared buying rental properties for income (and not for fast appreciation) which I had been doing for years with buying stocks for the safety and consistency of a dividend and not the quick buy and sell. I changed from a trader to an investor.

    My total savings is almost $1,000,000 today. I have just over $800,000 in 31 stocks 30 of which pay a dividend with the exception of BRK.B across a diverse base of industries. The rest is in gics. My dividends today are worth $35,276 per year. I've done the same projections on growth that tahitiguy speaks about.

    I finally believe that I can sell off my properties with a safe alternative to invest in.

    As a Canadian I have half of my portfolio in Canadian companies in Canadian dollars. 16 of my stocks are trading on the Toronto exchange although most of those can be bought in the US. Largest to smallest holdings, they are RY, BNS, TD, TRP, REI.UN, BCE, INN.UN,BMO, VET, AGF.B, RUS, SJR.B,BTE,BMO.PR.L, PPL, PWF.

    US purchased stocks, largest to smallest holdings are, O, GE, JNJ, MO, BP, INTC, BRK.B, MSFT, WR, PAYX, NAT, WM, MCD, APU, GSK.

  • Report this Comment On April 23, 2011, at 4:19 PM, davidm8797 wrote:

    The American stock market grew consistently over the last hundred years. Back then, after WW2, America was the only nuclear power, the dominant fighting force in the world, and had strong, conservative political values. America is much different today. There is no long term outlook for America. We have more enemies than ever, little or no values, and our business landscape is dominated by monopolies. Investing in the stock market, long term, today, seems suicidal in my opinion

  • Report this Comment On April 23, 2011, at 6:16 PM, sunnypt wrote:

    Davidm8797,

    Thats quite a strong view. Where do you invest with your money? May I suggest reading page 3 of the Berkshire Hathaway Annual Report for 2010 where Warren Buffet addresses his shareholders. I can't help but side with Buffet on this one.

  • Report this Comment On April 23, 2011, at 8:43 PM, techlvr11 wrote:

    I wish I read this when I was younger.

    The Fool in me says that if I can dare, I will succeed. Yes, the market will fall, profits will disappear and "too big to fail" will falter but those who spread their risks and show grit during times of hardship, will come out ahead.

    An example, when banks were still reeling under most serious recession in our lifetime, I bought 5000 shares of Citi. I dared. I lost 60% of all my investment but I held on. Today I have good returns. I could sell but I am holding on because I know in a few years, it'd double may be triple. Where else will i find such returns?

    Yes, Citi could fail but that's it; I am taking risk. That's what this article is all about - take calculated risks and hold on for long term growth.

  • Report this Comment On April 23, 2011, at 9:18 PM, anuvaka wrote:

    he grew up in a wealthy family and inherited assets upon his father's death (Hayford was just 4 years old). Before he self-directed the portfolio years later, the Fiduciary Trust Company ran things.

    This is a poor example. He started off "rich" at 4 years old. When I was 8 I had $10 in the savings bank.

    Given that 50years of time to gain interest, compounding and splits it is no wonder he has that kind of income. Can the average investor do the same? Most boomers did not start until they were 30 when IRA;s started.

    But it does emphasize my one caveat.

    Time is on your side.

  • Report this Comment On April 24, 2011, at 4:28 AM, LLP4 wrote:

    Davidm8797:

    One quick point regarding those who look at US stocks and evaluate them based on the outlook for the US economy: Remember that over 50% of the S&P 500's profits come from outside the US. This figure should grow as emerging economies should grow faster than the US.

    So when you invest in GE, ExxonMobil and Coca-cola, you are really invested in global companies that just happened to be based in the US.

  • Report this Comment On April 25, 2011, at 1:34 PM, ikkyu2 wrote:

    I like this article, and I like tahitiguy. Bravo - you're a role model for what we'd all like to do, if not for ourselves then maybe for our kids.

    As for the ethics of investing in tobacco stocks, let me give this little story. PM and MO, if taken together, are the largest position in my portfolio.

    In my day job as a doctor I behave as a proper doctor. I tell people to quit smoking, prescribe the nicotine patch and Zyban™, describe the horrors of metastatic lung cancer, ask my patients if they really want to be dropping those dividends into my bank account. Many of my patients quit and they are healthier for it.

    In my investment account, I act as a proper investor. I know perfectly well that what MO and PM do is lawful, addictive, and a cash flow generating machine. I'm sure they're going to make money. So I own them. Anyone who doesn't like it, write your Congressman and tell them to pass a law changing the rules and making tobacco abuse illegal.

  • Report this Comment On April 25, 2011, at 2:12 PM, tahitiguy wrote:

    Sunny7093 is angry at me apparently because I bought MO 38 years ago and held it, and kept buying *more* MO for the next 10 years or so, every time the price went down, and held *those* shares, so that now I have a 31% annual dividend payment from those shares of MO. Immoral, or lucky, or something that people couldn't replicate today, hence not worth writing about or considering.

    How about this, then:

    Back in 1995, when I first drew up my 30-year plan, I *also* owned 750 shares of Johnson & Johnson. Even though they only paid about a 1% dividend at the time, I had long recognized that they were perhaps the single best stock on the American market. But I couldn't afford to sell my better-paying stocks to buy this low-yield Blue Chip.

    Finally, in 1992, however, I bit the bullet, sold some stocks that were paying maybe 5% and bought my first 75 shares of J&J for $7,164.52. The annual dividend, I imagine, was probably about $75. But I bought it. And held it.

    Then, in 1994, I bought J&J *three* more times, even though it was *still* paying only about 1% dividends at the market yield.

    By the time I drew up my 30-year plan in 1995, I had accumulated 750 shares for a total price of $33,893.07. In the year 1995 those shares paid me a big fat $960 in dividends.

    Today, however, those 750 shares of J&J have split 2 for 1 and then 2 for 1 again, so that they have become 3000 shares.

    Those 3000 shares, at today's price of about $64.02 are worth about $192,200. Last year they paid me $6,330. This year, 2011, I am anticipating that they will pay me $6,996.

    For the year 2010, therefore, my dividend yield was about 14.9% on my initial investment -- an investment that paid me almost *nothing* for the first couple of years that I owned it.

    Is there something about this J&J story, SunnyBoy, that can make you angry? Can you try to say that *no one* can duplicate this story today by buying J&J?

    A couple of days ago there was *another* Fool article about the three stocks to own for the next *100* years, making my 30-year plan look like a piker. The three stocks were, I believe, Coke, P&G, and McDonalds. Sound choices, I would say, but I would also add J&J to the list and make it *four* stocks for the next 100 years.

    As for my doctor friend in the comment above who also owns MO -- years ago, when I was a teenager in the Los Angeles area, our family doctor had a beautiful little windowless, richly paneled office on Couch Row (or Sofa Gulch) in Beverly Hills. I would go by to see him for my annual check-up and he would sit behind his desk smoking a Kent (very healthy because of the filter on it!) and I would sit on the other side of his desk smoking my unfiltered Lucky Strike, which, in those days, cost $0.25 a pack from a vending machine outside a drugstore on Wilshire Boulevard. The doctor lived well into his 80s, I believe, and I'm a very healthy 69 -- although I *did* give up smoking ten years before I ever bought my first MO in 1987....

  • Report this Comment On April 25, 2011, at 2:14 PM, tahitiguy wrote:

    Sorry, I meant to say in the first line of my comment above that I first bought MO 24 years ago, back in the spring of 1987.

  • Report this Comment On April 25, 2011, at 2:44 PM, ikkyu2 wrote:

    We know about Sofa Gulch, tahitiguy! You've just dated yourself. :)

    Philip Morris and other companies used to advertise the health benefits of tobacco - and indeed nicotine is a mental stimulant and a powerful bronchodilator. There was no one beating the drum for the opposing case - that cigs are unhealthy - until the Surgeon General got into the picture in the mid-60's.

    To any and all readers: if you smoke, stop. If you don't smoke, don't start. Wealth is no good to you if you lack the health to enjoy it.

  • Report this Comment On April 25, 2011, at 2:59 PM, tahitiguy wrote:

    On the other hand, ikkyu2, back in the 50s, before I started smoking at 17 and even before the Surgeon General's report, almost everyone referred to cigarettes from time to time as "coffin nails" -- so even though it hadn't been *documented*, most people knew quite well that smoking wasn't good for you. I mean -- think about it: you put some burning material into you mouth and then INHALE the smoke?!

    Geez!

    PS -- remember "Nine out of ten doctors smoke Camels?"

  • Report this Comment On April 25, 2011, at 3:05 PM, ArizonaGeo wrote:

    How many people have died from lung cancer to pay his dividends?

  • Report this Comment On April 25, 2011, at 4:02 PM, tahitiguy wrote:

    How many people have died in cars manufactured by General Motors?

  • Report this Comment On April 25, 2011, at 5:42 PM, DJDynamicNC wrote:

    @Davidm8797: I just want to go ahead and correct your claims here:

    "The American stock market grew consistently over the last hundred years. Back then, after WW2, America was the only nuclear power, the dominant fighting force in the world, and had strong, conservative political values. America is much different today. There is no long term outlook for America. We have more enemies than ever, little or no values, and our business landscape is dominated by monopolies. Investing in the stock market, long term, today, seems suicidal in my opinion."

    First off, the last hundred years encompasses a lot more than just World War II. World War II ended in 1945 - that's roughly 75 years ago. Reaching back another 25 years brings us right into the era of World War I and the Great Depression. That's the chronological error.

    Second, you made some very bold and unsourced assertions. Your claim that the United States possessed "strong conservative values" coming right off of a period of incredible government spending to stimulate the economy, greatly enhanced education opportunities, and a massive expansion of the welfare state by a left-wing President so popular he was elected four consecutive times is a curious depiction. Not too much later after the war, you'd also see a major expansion of Social Security, the implementation of complete, single-payer socialized healthcare (for everyone over 65), and massive government investments in infrastructure. All of which was incredibly popular, and all of which was opposed at every turn by conservatives from Wendall Wilkie onward.

    I'm just not clear on how you can characterize that as conservative values.

    You are right, on the other hand, about this time period representing an era of incredible prosperity. I expect there is a causal relationship there.

  • Report this Comment On April 25, 2011, at 5:48 PM, DJDynamicNC wrote:

    @tahitiguy: "How many people have died in cars manufactured by General Motors?"

    Touche.

    Honestly, I think cars are horribly destructive and dangerous things and I still own Ford shares. I don't think you can consider owning shares of a company the same as "supporting" the company - if I buy another hundred shares of Ford, I'm buying them on the secondary market and Ford doesn't see a dime. Indeed, I'm now siphoning off some of Ford's profits every quarter - which I can put towards my local campaign for better transit. I should think this is a great way to make a difference and repurpose ill-gotten profits for a better world.

  • Report this Comment On April 26, 2011, at 1:46 AM, pryan37bb wrote:

    Honestly, if you're going to worry about all the moral implications of your investments, you're gonna have a hard time picking stocks, because you'll wind up shying away from GE because of the Japanese power plants, miss long-term gains in JNJ because of product recalls, and skip MCD's very solid performance because "Super Size Me" made you sick. As was previously mentioned, your ownership is entirely secondary, so they don't see a penny of your money, but instead you get a substantial amount of their money in those "supersized" dividends.

  • Report this Comment On April 28, 2011, at 1:29 AM, esxokm wrote:

    Excellent article.

    For me, the takeaway is that dividends are indeed a powerful source of wealth generation when used in conjunction with a time advantage.

    It's true -- and I knew this would be the driving force of the discussion before I checked even one comment -- that the man in question was rich to begin with. It's fair to highlight this, as the author did in the article.

    However, the lesson is still vital, and valid. In a sense, the fact that the man was already wealthy shouldn't matter to most. Instead, take this to heart and begin to identify great dividend-paying stocks. And then take a look at your portfolio to see which stocks could be paying bigger dividends but don't, thus potentially stimulating a change in your overall investment plan (as an example, I own DIS and believe the company could pay a bigger dividend, yet it refuses to...should I sell out?).

    I don't think I could ever buy Altria, but thankfully, I own KO, and believe that stock is a wonderful candidate for effective-yield generation.

    And to those who talk of time machines and 20/20 hindsight: this becomes less of an issue the younger you are. If you have many years in retirement, look at this article as a dispatch from H.G. Wells himself...

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