It's all in the interest of research: This week I asked people
around the office what brands they're loyal to.
StreetAuthority Chief Operating Officer Jack Lizmi pledges his
allegiance to TVs by Samsung (London: SMSN) and cars by
Toyota (
TM
)
. Business Development Manager Karie Meltzer remains a fan of Cole
Haan high heels, despite
Nike's (
NKE
)
decision late last year to sell the iconic brand to a
private-equity firm.
Among StreetAuthority's editors, Brad Briggs fills his car at
Exxon Mobil (
XOM
)
Exxon stations whenever he can. Anthony Haddad uses razors by
Gillette, a product of
Procter & Gamble (
PG
)
, and Rosie Hatch is a devotee of
Coca-Cola's (
KO
)
namesake brand. Francisco Bermea half-heartedly laments that "the
most consistent thing" in his life these days is Pert Plus, the
shampoo, another product of P&G.
Brand loyalties matter, to consumers and to the companies that
typically spend anywhere from a few dollars to a few hundred
dollars or more to acquire just one new customer.
In his September 2012 book "The Fusion Marketing Bible" author
Lon Safko says
Priceline.com (Nasdaq: PCLN)
spends about $7 in marketing and advertising per new customer. The
expenses go up to $10 for BarnesandNoble.com, and to $175 for TD
Waterhouse.
Sprint's (S)
Sprint PCS customeracquisition cost amounts to $315 per capita.
Of course, every company is interested in acquiring new clients,
but from anet revenue perspective, the advantage goes to those
businesses whose customers keep coming back for more.
Another advantage of customer loyalty: retained customers
oftenoffer business referrals and word-of-mouth recommendations. In
this age of Yelp, Facebook and other social media, it pays to be
"liked."
Add it all up and it only stands to reason that the companies
that retain their customers for a long period of time stand a
better chance of delivering consistent, outsized profits for
investors.
So noted Paul Tracy in the January mid-month update of his
Top 10 Stocks
advisory.
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"It makes perfect sense," wrote Paul. "Existing customers are
several hundred percent more likely to buy when compared with new
prospects." Moreover, Paul said, "Businesses that enjoy strong
customer loyalty also have an easier time raising their prices,
which can lead to fatprofit margins ."
One
Top 10 Stocks
holding that fits the customer loyalty mold to a "T" is
Starbucks (SBUX)
, the global coffee giant whoseshares have risen more than
five-fold since late 2008.
The average Starbucks customer visits one of the company's
18,000 stores six times a month, and its most loyal customers visit
16 times a month.
"Its customers are fanatical about their beverages, and they
stay loyal to Starbucks for the brand, the customer experience and
the consistency of the company's drinks," said Paul.
Fueling the fanaticism is "My Starbucks Rewards," a customer
loyalty program industry consultant LoyalMark unreservedly called
"the most successful loyalty program in the U.S."
Thebottom line for investors, according to Paul, is this:
"Customer loyalty comes in many forms. Sometimes a company's
customers are locked in under long-term contracts. In other cases
customers face significant switching costs... or they're
extremely loyal to their favorite brands. Whatever the reason, if
you invest exclusively in companies that keep their customers
happy -- and keep them buying for years... decades... even for a
lifetime -- then you'll increase your odds of beating the
market."
While many companies enjoy strong, lasting customer loyalty, not
all of them return the favor by returningmoney back to shareholders
via dividends and buybacks -- two "rewards" for investors that can
often make the difference between meeting the market and beating
the market.
With that in mind, Paul recently released a new report revealing
what he calls the "Dividend Vault", a massive $1.7 TRILLIONcash
hoard many U.S. companies -- including some of the country's most
popular brand names -- are sitting on right now.
It started during the height of the 2007-2008 financial crisis.
Acting out of fear, companies started hoarding cash as banks
stopped lending and theeconomy came to an abrupt halt. Corporate
America has spent the past few years hoarding this cash like it was
going out of style. And now this "Dividend Vault" is so large, many
companies simply can't decide what to do with all that cash.
Corporate America has spent the last few years hoarding this
cash like it was going out of style.
The only solution: Start paying that money out to shareholders
as dividends.
Of course, these companies aren't going to pay it out all at
once, but you'd be surprised by the sheer magnitude of this
opportunity.
For example, S&P SeniorIndex Analyst Howard Silverblatt
recently told TheWall Street Journal that S&P 500 companies
paid a record $281.5 billion in dividends in 2012 -- up 17% from
2011 and 14% higher than the previous record set in 2008.
And Silverblatt says, "the only way for there not to be a record
in 2013 is for mass cuts in dividends..." But with all that extra
cash sitting in the bank, we don't expect that to happen.
Paul has already gone on record saying that
we're headed for a "Dividend Decade"
-- a period where ALL of the market's returns in the next decade
come from dividends and is convinced that shares of companies that
are tapping into their huge cash balances, or "Dividend Vaults."
are the way to go.
Paul and his team have identifiedwill account for roughly 10%,
or $30.1 billion, of all dividends paid by major U.S. corporations
in 2013.
But this isn't the only reason Paul likes these companies. In
his latest research video, Paul goes on to explain why these
companies are not only likely to pay out hefty dividends for years
to come, but also have the potential to deliver big share price
gains.
Action to Take -->
You can watch Paul's latest presentation, and learn how to get a
piece of the next round of cash payouts -- payouts that will be
sent to investors in the next several weeks --
here
. (If you'd prefer to read a transcript,
click here
.)