Think of where you'd be right now if you'd made this move 10
years ago.
The S&P 500 has returned 92% during that time (a 7% average
annual gain). Meanwhile,
Permian BasinRoyalty Trust (NYSE:
PBT
)
is up 575% during the same span.
Energy Transfer Partners (NYSE:
ETP
)
has returned 540%.
Entertainment Properties Trust (NYSE:
EPR
)
is showing a return of 302%.
And those are some of the most boring investments you can think
of -- REITs, pipeline operators, and royalty trusts. But they all
have one thing in common.
They pay solid dividends.
As the Chief Investment Strategist behind
High-Yield Investing
, I'm biased. But I think dividends are the most powerful tool in
investing. You don't have to take my word for it. Other investors
agree:
|
"I have made more money in retirement than I did when I
was working. Income from dividend-paying stocks (which I
collect every month) is even better than my greatest
expectations."
-
High-Yield Investing
subscriber, William B.
|
Even John D. Rockefeller once quipped that the only thing that
gave him pleasure was to see his dividends coming in.
The simple fact is that how you treat thedividend -- often the
forgotten step-child among investors -- is the most important
investing decision you'll make today... in the next year... even
the next decade.
Let me show you what I mean.
Take two portfolios, each worth $100,000. The first one earns
8% in capital gains each year. The second one earns half that
amount in capital gains -- only 4% each year -- but earns a 6%
dividend that's reinvested.
I chose these numbers as they illustrate a choice investors
can be faced with -- invest in a faster-growing stock that
doesn't pay a cent in dividends, or earn a nice yield and see
slower growth. Here's the best news -- you'll end up earning more
with the dividend, and typically have fewer ups and downs as you
would with a riskier growth stock.
In fact, in 10 years your portfolio would be worth $265,089 if
you went with the dividend-paying holdings, versus $215,892 with
the growth-only portfolio.
Over even longer, the difference is more dramatic.
Wait 20 years and your dividend portfolio would be worth over
$702,000 compared to $466,096 -- a difference of more than
$200,000.
And here's the best part. The misconception is that dividend
payers are boring, stodgy securities. They might pay a few
percent, but they won't grow enough to really make a
difference.
That couldn't be further from the truth...
- Shares of
Sun Communities (NYSE:
SUI
)
yield 5.5%, but they've returned 751% since the March
2009market low.
- During the same time, the
Reaves Utility Income Fund (AMEX:
UTG
)
has returned 356%, while paying monthly dividends that
now equal a 6% yield.
- And the
NuveenReal Estate Income Fund (AMEX:
JRS
)
has returned 520% in addition to its 7.7% yield.
|
But that's during a strong market rally, and coming off of
multi-year lows. What about in different conditions?
-
American Capital Agency
(NYSE:
ANGC
)
is paying 14.3% and has a total of return of 49% during
the past year (a time when the S&P 500 is up only
15%).
-
Verizon (NYSE:
VZ
)
, which pays a 4.6%dividend yield , has returned 32% in
the past year.
|
That's not to say every dividend payer will be a big winner.
It won't be, and I wouldn't listen to anyone who says they
canguarantee a stock's gains.
But in the sizzle of the mainstream financial media, it's the
fast-moving names like Apple and Google that get most of the
headlines. As you can see, it may just be the dividend-payers
that are most important to your success.
-- Carla Pasternak
Carla Pasternak does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.