6 Secrets to Finding
Dividend “Money Machines”
That Keep Your Portfolio Growing
In Any Type of Market
What if you owned a money machine
automatically cranking out cash for you day-in and day-out?
And not only that
the machine reproduces itself. It breeds more little money machines — and they're all working 24/7, making money for you.
Sounds fantastic — or at least illegal — doesn't it?
But in a very real sense, that's just what happens when you buy dividend-paying stocks and reinvest the dividends.
Hard to believe? Just look at these examples
- Money Machine #1: Pepsico — $2,000 invested in Pepsico in 1980 is now worth more than $193,125. You would have started with 80 shares, but by reinvesting dividends, you now would have more than 3,000 shares.
- Money Machine #2: Proctor and Gamble — $2,000 invested in Proctor and Gamble in 1980 would be worth more than $123,247 today. You would have started with 27 shares, but by reinvesting dividends, you now would have over 1,980 shares.
- Money Machine #3: Johnson & Johnson — $2,000 invested in Johnson & Johnson in 1980 would be worth $151,482 today. You would have started with only 13 shares of stock. Today thanks to reinvestment and splits, you now would own over 2,350 shares.
You'd have a portfolio now worth more than $467,854, starting with a total investment of only $6,000. And you never needed to add another penny.
Today, your little $6,000 investment is generating $13,720 every year in dividends. You're earning more than
DOUBLE your total original investment
EVERY YEAR in dividends alone!
Now that's what you call a money machine!
Imagine yourself 10 or 20 years from now with a few money machines in full operation, cranking out cash
you could have a earned income no matter which way the market moved.
In a moment, we'll show you some of the greatest success stories we've had in the last three years at Motley Fool Income Investor. And how you can access all of our dividend stock ideas and research for FREE!
You see, our passion here at Income Investor is to help people like you build real wealth through the power of great dividend-paying stocks.
So let's get started and show you
The Secret to Building Real Wealth
We believe that building a long-term fortune simply requires these two steps:
- Buy the best dividend-paying stocks, and
- Reinvest the dividends.
Do this and you've built an instant money machine.
For example, here's the difference reinvesting dividends can make.
The Power of Reinvesting Dividends
It's true. If you had invested $10,000 in Ibbotson's large-cap companies back in 1980, you could sell them today for about $130,000. Not too shabby.
Had you reinvested the dividends, you'd be sitting on more than $400,000. And that's assuming you didn't invest another dollar since — just imagine if you had been investing even a modest amount along the way.
What a difference. Dividends really do matter. Stocks have done well — no matter how you slice it. You can see that clearly from the chart. You can also see that dividends can make the difference between merely doing well and quietly amassing a fortune.
6 Secrets of Dividend Investing:
How You Can Earn Great Returns with Less Risk
Finding the best dividend stocks takes some legwork and careful analysis. But here's how you can find the best long-term winners:
- Avoid the Highest Dividend Stocks — You can't pick stocks by dividend yield alone. Above-normal dividends are often a red flag for a company in distress. Studies have consistently shown that you will earn higher long-term returns by avoiding risky stocks with overly high dividends.
- Beware the “Dividend Time Bombs” — Not all dividends are created equal. Even if a company has a generous dividend, it must be able to maintain it. A "doomed-to-be-cut" dividend can be worse than no dividend at all. Once a dividend is cut, it's likely to make the share price fall also.
- Cash Is King — Free cash flow (FCF) is the true health of the business. Find the companies that generate tons of it. Even in the worst of times, those flush with greenbacks have options. Firms with cash can buy back their shares to raise stock prices, make their debt payments, increase dividends, and buy other profitable businesses. That's why cash flow is the single most important factor that determines value in the marketplace.
- Don't Focus on Income without Growth — Only growing businesses are truly healthy. So cash flow needs to be strong enough to not only pay a healthy dividend but also generate enough cash to grow and stay strong strategically.
- Don't Forget Value — An investment's total yield depends on both the dividend amount and the stock price. Stocks of companies making real products and real profits often don't make the headlines. So dividend stocks can also be a great source of hidden value. Finding value by focusing on dividends first can help you avoid catching the "falling knives" that trap some value investors.
- Have a Longer-Term Focus — Many brokerage houses make investment recommendations based on a very short-term view of the world — often a maximum 12-month timeframe. Individual investors should have at least a three- to five-year view when considering investments. More time helps you fully realize the true power of compounding dividends.
At Income Investor we do all this legwork and much more before we recommend any stock to you. We have truly looked under the hood, kicked the tires, and taken a thorough test drive before we put you behind the wheel of any investment. Our stock screening system sifts out the highest potential stocks from around the world.
That's why we believe income investing is
The Best Way to Secure Your Financial Dreams
Dividend-paying stocks are absolutely the fastest and most reliable way to achieve financial security and independence. Here are five reasons why you should love dividend stocks right now:
- They trump non-dividend payers, even in down markets. According to Standard & Poor's, during 2008's market meltdown, dividend-paying stocks came out 6.34% ahead of non-dividend payers.
- They're low risk. Since the companies pay out cash, investors are more willing to hold dividend stocks through bear markets. Hence, they don't fall as far or as quickly as non-dividend stocks. These stocks become a magnet for investors seeking security.
- They earn much better yields with lower taxes. Thanks to a recent change in the tax law, dividends are now taxed at only 15%. Compare that to interest on your savings, CD, or money market account that is taxed as ordinary income — up to 35%! Standard & Poor's estimates this change might have saved investors more than $100 billion through 2008. Much of this will be invested back in dividend stocks.
- They help you avoid the Enrons of tomorrow. Dividends don't lie. For example, between 1997 and 2000, Enron's "earnings" rose 69% but dividends rose only 9%. That's a sure sign that something fishy was going on. Paper profits can fool analysts but hard cash can't be faked.
- By reinvesting dividends, you “dollar-cost average” and get the power of compounding automatically. Reinvesting dividends improves your portfolio's long-term returns by buying more shares when the price is low and by helping your profits earn more profits.
So, you see dividends aren't just for retirees. They're for any investor who wants to amass great wealth with low risk.
And there's never been an easier way to start building wealth than with Motley Fool's Income Investor.
We would like to give you 30 days of FREE, unfettered access to our Income Investor members-only website. There, you can read our most recent issue and soak in all past and current reports, recommendations and issues.
More on how you can sign-up for a risk-free trial in a moment. But first, here's the inside scoop on the 7 hottest stock ideas for the months ahead...
Warren Buffett would be proud
Dividend stocks are the best way to follow Warren Buffett's famous rules:
Rule No.1: Never lose money
Rule No.2: Never forget rule No.1
Buffett always seeks out companies in real industries, making real products and real profits. More times than not, these are dividend-paying stocks.
If you're like many investors you're still recovering from the tech wreck. You're painfully aware that it takes a 100% gain just to break even after a 50% loss. That's why you want to avoid losing money at all costs. Dividends are the best way to find solid stocks. They are the best way to keep your portfolio growing during tough times. And they are the best way to compound your wealth over time.
That's why dividend stocks are perfect for "Foolish" investors. And you should at least check out how Motley Fool's Income Investor can help you with our No-Risk Offer.
You Can Also Earn Great Capital Gains in Dividend Stocks!
And dividend stocks don't need to be just for income. Using our methods we're often able to find great undervalued stocks. Focusing on cash-flow, we find them just before the market sees them.
For example, just look at the performance of these current Income Investor recommendations:
- StatoilHydro — Up 76%
- Health Care REIT — Up 77%
- Petrobras — Up 99%
- Tupperware — Up 139%
- Posco — Up 160%
(Returns as of November 19, 2009)
These are just a few of the more than 56 current recommendations that are collectively beating the S&P 500 by 7 percentage points.
This is not cherry-picking. This is an average return of ALL of the picks — the big winners and the losers.
Not to mention, our subscribers are also enjoying an average dividend yield of 4.2%, all the while suffering far less risk and volatility.
We hope you've seen that Income Investor is for anyone who wants high rewards and low risk. We have a complete system that makes it simple for you to build a powerful wealth-creating portfolio. And you can try this system risk-free, without any obligation
What to Do Next… Try Income Investor FREE for 30 Days
When you start your 30-day free trial today, you'll have full access to everything Income Investor has to offer — all newsletter issues past and current, all recommendations and all exclusive reports.
There is no risk or obligation and you'll see exactly how Income Investor's wealth-building system can help you:
- Find Great Stocks — You'll get our best stock ideas for growth, value and annual yield. Our focus on dividends gives us the most reliable screen there is.
- Experience new freedom from worry — No matter what the market does, your dividends will keep cranking out cash and building your wealth. And since our recommendations are long-term "buy-and-holds," you don't need to worry about trading or timing the market.
- Save on commission and fees — Most of these investments can be bought directly from the company through direct stock purchase or dividend reinvestment plans.
- Discover your real potential as an investor — With dividends, your stocks pay you to invest. They generate the cash to help you acquire more ownership in the company. You don't just own more valuable shares, you own a bigger share of the business.
- Find the solid value stocks — With each recommendation from Income Investor, you'll receive specific valuations on what we think the company is worth. This makes it easy to buy for value and growth as well as dividend.
- Simplify Your Life — If you choose, you'll be able to adopt a "buy and forget it" plan that just grows and grows. When you need it, you'll be collecting income on top of a rock-solid foundation.
All told, it's an incredible system to help you start building real wealth in the fastest, most-reliable way possible. And you can take it for a free, 30-day test drive…
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