Think of where you'd be right now if you'd made this move 10
The S&P 500 has returned 92% during that time (a 7% average
annual gain). Meanwhile,
Permian BasinRoyalty Trust (NYSE:
is up 575% during the same span.
Energy Transfer Partners (NYSE:
has returned 540%.
Entertainment Properties Trust (NYSE:
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
, 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
"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
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
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
That couldn't be further from the truth...
- Shares of
Sun Communities (NYSE:
yield 5.5%, but they've returned 751% since the March
- During the same time, the
Reaves Utility Income Fund (AMEX:
has returned 356%, while paying monthly dividends that
now equal a 6% yield.
- And the
NuveenReal Estate Income Fund (AMEX:
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
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
, 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.
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