As investors, we all share a common goal -- making money. Yet for most of us, that goal is a means to an end, not the end itself. The purpose of money isn't simply to accumulate it, but rather to be able to afford -- and then some -- big ticket items such as retirement or the kids' college.
So why make investing harder than it has to be? Take the easiest route to help you achieve your financial goals. And if you don't think there are any easy ways to make money, I recommend you:
- Buy great companies at good prices.
- Reinvest your dividends until you need them.
- When you need money, live off your dividend streams.
Beyond that, all you really need to do is periodically check in with your companies to make sure they're still worth owning. That's how some of the world's biggest fortunes were made and are maintained.
How it works
Great companies often pay their shareholders for being part owners, and deservedly so. And the best companies keep their owners happy by growing their payouts over time. Consider these examples:
|
Company |
Current Yield |
10-Year Dividend CAGR* |
|---|---|---|
|
Masco (NYSE:MAS) |
3.2% |
8.4% |
|
CBL & Associates (NYSE:CBL) |
4.2% |
8.4% |
|
General Growth Properties (NYSE:GGP) |
3.4% |
11.4% |
|
Bank of America (NYSE:BAC) |
4.2% |
13.5% |
|
Pfizer (NYSE:PFE) |
3.5% |
16.8% |
|
Altria (NYSE:MO) |
4.3% |
20.6% |
|
Citigroup (NYSE:C) |
3.9% |
29.3% |
It gets better
If you reinvest your dividends with a company that sports a 3% current yield and 8% annual dividend growth, your investment income would grow at that same 11% annually. That's even before considering new income generated by any additional investments you make along the way. Even starting from scratch, the long-term power of compounding is astounding.
Serious wealth really can be built over time, with this very simple strategy. At Motley Fool Income Investor, we take advantage of the amazing long-run power of dividends to help our subscribers wind up on top. Join us today to get started building your low-maintenance, wealth-generating portfolio. You can take the next 30 days to look around our lineup of recommendations, free and with no obligation.
At the time of publication, Fool contributor Chuck Saletta owned shares of Bank of America, and his wife owned shares of General Growth Properties. Bank of America is an Income Investor recommendation. Pfizer is an Inside Value pick. The Fool has a disclosure policy.
