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A Worry-Free Way to Supplement Your Income in the Stock MarketBy
Thursday, May 5, 2011
Now that stocks and commodities have soared in the past eight months, most contrarian investors expect a big decline to hit any day now.
If that decline arrives – if stocks fall 10% or 20% – that's going to hurt a lot of folks... especially the ones who are "late to the party." But there's a small group of investors who couldn't care less.
These are the few folks who have had their "magic moment" as an investor. Let me explain...
Almost no one belongs to this "worry free" group because most folks are obsessed with short-term gratification. They pore over day-to-day market movements, news releases, CNBC clips, and other things that are meaningless in the "big picture." They're always busy trying to get the market to do something for them... instead of using the greatest power in all of investing.
That power is TIME. And used properly, time causes extraordinary things to happen to your portfolio. Time allows you to generate huge amounts of income... and time makes it so you don't care one bit about the moods of the stock market.
The investors who don't care about market corrections are the ones who have learned how to buy "World Dominating Dividend Growers" at good prices and hold them for years.
World Dominating Dividend Growers are the world's biggest and best dividend-paying businesses. They are names you see everyday... like Johnson & Johnson and Coca-Cola. Investors who buy them cheap and hold onto them are the few who have had that "magic moment" revelation. Here's how it works...
An investor who bought dividend machine cigarette maker Altria back in May 2009 at $17 per share is now earning close to a 9% yield on his purchase price. Do you think that guy cares about a 10% or 20% stock market correction? Do you think he cares about another 5% decline in home prices?
No way.
He's comfortable knowing that no matter what the stock market does, folks are still going to smoke cigarettes tomorrow. He knows another Flash Crash could come around and he would still get that 9% yield on his shares. They could shut the market down for a year, and he'd still get his money. That's extraordinary peace of mind most investors will never enjoy... because they're obsessed with short-term gratification.
The obsession with short-term gratification causes people to "miss the boat" on the incredible income power of World Dominating Dividend Growers. Most World Dominating Dividend Growers don't pay out huge current yields. They pay current yields of around 3%-4%... and then "grow" their way to pay shareholders 10% and 20% yields. These yields end up as the safest, largest income streams you'll find anywhere.
As my colleague Dan Ferris recently noted on his 12% Letter holding Intel:
Intel's yield isn't gigantic right now. But remember... it has raised its dividend every year for the last seven years. Since 1993, Intel's dividend has grown at a rate of 25.93% per year. At that rate of dividend growth, you can hold the stock five years, and you'll find yourself collecting dividends totaling 11% per year over today's cost. Hold it another five years, and with that kind of dividend growth you'll get 40% per year over today's share price.
If you're earning a 40% (and growing) yield on a stock, do you care if the share price falls 20%? Heck no!
Silver is down 8%? Oil is up $4 a barrel? Interest rates are up a quarter of a percent? This or that guru is predicting a stock market decline? Big deal.
No matter what the day-to-day hype stories are, the "biggies" of the corporate world – companies like Johnson & Johnson and Coca-Cola – will still be No. 1 in their industries. They'll still have giant, insurmountable competitive advantages. They'll still have thick profit margins. They'll still generate huge cash flows. They'll still direct a portion of those cash flows to shareholders through ever-increasing dividends.
For most folks, short-term trading takes up too much time. It causes too much stress. It causes sleepless nights. It generates high fees. It drains mental energy. But an owner of a World Dominating Dividend Grower portfolio doesn't worry about much. All he needs is TIME.
Think of it like planting a money tree. It's small today, but over time, it will grow to be a bonanza.
If you're looking for a long-term, worry-free way to supplement your income, use time to your advantage... and start buying World Dominating Dividend Growers now.
Good investing,
Brian Hunt
Further Reading:
As DailyWealth readers know, World Dominating Dividend Growers will protect your money and increase your income year after year. These companies will grow your wealth in even the worst economic environment. If you haven't bought into the "WDDG" plan yet, it's not too late. Find out more here:
Market NotesUPDATE ON CLEAN ENERGY: YES, IT'S STILL A MONEY LOSER We've made a mistake in our recent commentaries on the huge "risk on, risk off" trade...
We've told you just about every asset (stocks, commodities, and gold) is increasing in price as the dollar plummets. We've failed to mention clean energy shares are not moving higher... and they still deserve the abuse we heap on them from time to time. For a picture of this idea, we check in on the popular "clean energy" fund PBW again...
The PBW is a "one click" way to buy a basket of companies that deal in clean energy, like wind and solar. What folks don't understand about these companies is that most are such terrible businesses, they are "perfectly hedged." They are able to lose money in both good times and bad. Their stocks are able to sink in both bull and bear markets.
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