Not a subscriber? Click here to learn
more.
|
| Home | About Us | Resources | Archive | Free Reports | Market Window |
How to Participate in the World's Best Income Investment StrategyBy
Saturday, July 10, 2010
Early last year, I gave an interview on what I believe is the world's greatest income investing secret.
While you can take advantage of this secret at any time, certain times are better to begin than others.
Right now is one of the times I wouldn't just call "better than others." I'd call it a "you need to do this with a lot of money as soon as possible" kind of time.
The traditional ways of income investing – like owning real estate stocks (REITs), oil trusts, or government bonds – are worthless compared to this wealth-compounding strategy.
The secret is buying shares of World Dominating stocks with large and growing dividends.
World Dominators are the No. 1 companies in their industries. They're consistently profitable, year after year. They gush free cash flow. And they pay a lot of that cash out to their shareholders. Think Wal-Mart, ExxonMobil, and Procter & Gamble.
World Dominators don't have the highest current yields. The stocks above pay between 2.5% and 3.5%. But the best income stocks aren't the ones with the highest current yields. That's a common mistake among income investors. High yields come with high risk. Investors get sucked into risky REITs and energy trusts because they want to earn a high yield right away. But too often, the extra risk produces losses.
Especially now, you need to keep your money safe.
That's why the best income strategy is to buy the safest stocks, the World Dominators. And they are perfect for long-term income investors because they pay dividends that go up every year. ExxonMobil has raised its dividend every year for 27 years. Wal-Mart has raised its dividend every year for 34 years. And Procter & Gamble has raised its dividend every single year for 56 years.
That's over half a century of dividend raises.
Best of all, you can count on these companies to raise their dividends year after year because they dominate their industries. Wal-Mart is the world's biggest retailer. ExxonMobil is the No. 1 oil and gas company. And Procter & Gamble is the largest consumer-products company in the world (selling to half the world's population).
Here's what it means for long-term income investors: In 10 years, that 2.5%-and-growing yield can give you a 10% return on your original investment. Imagine owning a business like Wal-Mart and getting a 10% yield. It's an income investor's dream come true.
Being the No. 1 company in the industry is how these companies are able to crank out huge amounts of cash flow year after year and pay higher and higher dividends. They don't have to grow in order to keep paying out big dividends, year after year.
Obviously, everyone knows about these companies. But what most people don't realize is that right now they're cheaper than ever. World Dominators are the most valuable companies in the world. Most of them are easily worth anywhere from 20 times earnings to as much as 30 times earnings. Right now, all of them are trading for less than 15 times earnings.
One of them, ExxonMobil, is selling for just eight times this year's estimated earnings. Two of them trade for just 10 times earnings. You can't count on this to last forever. When World Dominators get this cheap, the only thing to do is buy them.
I've been writing newsletters for almost 14 years and I've never found as sure a thing in the stock market as buying cheap World Dominators. These stocks are like bonds with interest payments that grow. They're ideal for income investors, because over time, they'll pay you more and more income as each year passes. Bonds can't do that. World Dominators can. Buy them now, while they're still cheap enough.
Good investing,
Further Reading:
More commentary on blue-chip bargains...
Steve Sjuggerud likes Big Pharma stocks at these levels. "Most big pharmaceutical companies are at record cheap values – by far," he writes. "History shows when these stocks get this cheap, triple-digit gains follow." Read more here: Where to Find Safe Triple-Digit Gains Right Now.
Tom Dyson says one blue-chip tobacco company is paying the highest yield in its history. Read more here: Get 7% Dividends from the Most Profitable Stock in American History.
Market NotesCHART OF THE WEEK: ONE MORE "ASIA UP, THE WEST NOT SO MUCH" TREND For our chart of the week, we're taking one more look at the huge "Asia up, the West not so much" trend that will last for decades. The chart shows the amazing strength in Thai stocks.
Thailand is another Asian country without the huge unfunded welfare programs Western Europe and the U.S. face right now. Like its neighbors Singapore and Malaysia, it's a short plane or boat ride away from the giant emerging markets of India and China. When India and China grow, Thailand grows with them.
For much of the past year, the only news coming out of Thailand has been about violent political protests. Over 80 people have died in recent demonstrations. But as you can see from this week's chart of the iShares Thailand Fund (THD), this ugly news has barely budged the uptrend in the country's stock market.
|
Stat of the week
$7 billion
Amount of money the U.S. Post Office is expected to lose this year. In The Daily Crux
Recent Articles
|
