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The Rich, Seasoned Investor's Way to Wealth

By Dan Ferris, editor, The 12% Letter
Tuesday, April 5, 2011

In Saturday's DailyWealth essay, my colleague Brian Hunt answered a question he gets all the time from his friends and family: What do I do with my money now?
His answer is "the greatest stock market system ever discovered" – buying World Dominating Dividend Growers... elite companies with fortress balance sheets that have extraordinary histories of raising their dividends.
Longtime DailyWealth readers know this is my answer as well. It's the safest, surest road to wealth there is. And I've been shouting it from the rooftops for years... which brings me to a question I get all the time from friends, family, and frustrated readers most of all:
"I don't understand WHAT'S SO GREAT about years and years of dividend increases when the dividend starts from such a low level it will take years and years to reach, say, 6%. Why not invest in good stocks that are already paying 5%-6%?"
Here's how I respond...
The biggest mistake income investors make is chasing higher yields by purchasing risky, leveraged businesses... instead of buying great, safe businesses that grow their payouts faster. These businesses – these World Dominating Dividend Growers – are the kind of stock that's appropriate for those looking to put huge amounts of safe money to work... They're exactly right for folks interested in safe, massive wealth building for years and years... They're where you should put your 401(k) money and your mother's money.
WHAT'S SO GREAT about the World Dominating Dividend Growers is they're the best long-term wealth building plan that lets you sleep like a baby... instead of a plan filled with lots of financial and real estate companies that carry huge debt loads... the kind that got slaughtered in the 2008 credit crisis.
Take Wal-Mart as an example...
Wal-Mart – the world's greatest, biggest retailer – yields about 2.8%. That's a lot lower than most income-focused investors are interested in. But get this: Over the last 10 years, Wal-Mart has grown its dividend about 19% per year. It just raised it by 20.7%, proving it can still sustain high dividend growth.
Here's what a 2.3% yield growing at 20.7% a year looks like...
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
At 20.7% annual growth, you're in double-digit territory by year nine. (And that's WITHOUT reinvesting the dividends. If you do that, your yield grows even faster.)
We're not talking about a leveraged entity, managed by some firm charging 2% management fees and taking 50% of the distributable cash flow. We're talking about Wal-Mart, one of the greatest, most consistently profitable businesses that's ever existed. It has raised its dividend yield every single year since going public... That's 39 years of solid dividend increases.
At current prices, it's hard to characterize Wal-Mart as anything but one of the best deals, income or otherwise, on earth today.
Don't get me wrong. There are several good "high-current-income" opportunities that my readers are enjoying right now. But they require a much more monitoring... more than many folks are interested in doing.
If you're interested in owning safe, low-stress income streams, the World Dominating Dividend Growers plan is the ultimate plan. Granted, this isn't the sexy Wall Street pitch folks are used to hearing. But these companies are the rich, seasoned investor's way to wealth... and always will be.
Good investing,

Further Reading:

See more of our best World Dominating Dividend Grower essays here:
Imagine owning a business like Wal-Mart and getting a 10% yield. It's an income investor's dream come true…
There are two key things in mind when it comes to World Dominating Dividend Growers...
You want to know what the greatest investor in history owns? His name is Warren Buffett and he owns World Dominators.
Invest only in the safest stocks, and you'll retire rich. And if you wanted to, you could probably retire years ahead of schedule...

Market Notes


The "battle ground" we noted on March 22 wasn't much of a battle ground at all...
Several weeks ago, we noted how the popular 50-day moving average was an important "test point" for the stock market's latest rally off its recent low. We know many traders watch this indicator to delineate bull and bear markets... so it's an important "buyers vs. sellers" level.
As you can see from today's chart, the market just breezed past this level... and is now within spitting distance of an upside breakout past the February closing high of 1,343. If the market is able to breeze past this second test, it tells us an important story...
The story is how the folks in Washington D.C. will do everything in their power to prop up stock and housing prices. This means injecting massive amounts of "funny money" credit into the system... and preventing natural market forces from cleansing the constipated, malfunctioning housing market. It will end badly. But for now, the market floats on an ocean of liquidity... and the trend is UP. Trade accordingly.

The stock market approaches the February high

In The Daily Crux

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