Think of where you'd be right now if you'd made this move 10
years ago. The S&P 500Index is up only 28% during that time.
You could have seen returns of 328%, 305%, or 626%.
And that's with some of the most boring companies you can think of
-- housing real state investment trusts (
), pipeline operators and cigarette makers. But they all have one
thing in common.
They pay 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 expectations," said
subscriber, William B.
Even John D. Rockefeller once quipped that the only thing that
gave him pleasure was to see his
The simple fact is that how you treat the dividend -- 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 Imean .
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
I chose these numbers as they illustrate a choice investors are
usually 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-paying stock and typically have fewer ups and downs as you
would with a riskier growth stock.
In fact, within 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 an even longer period of time, the difference is more
Wait 20 years and your dividend portfolio would be worth more than
$702,723 compared with $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 return enough to really make a difference.
That couldn't be further from the truth...
EV Energy Partners (Nasdaq:
yield 5.5%, but this hasn't stopped them from returning 459% since
the March 6, 2009.
During the same time, the
Reaves Utility Income Fund (AMEX:
has returned 284%, while paying monthly dividends that now equal a
Medical Properties Trust (NYSE:
has returned 398% in addition to its 6.5% yield.
But that's during a strong market rally and coming off of
multi-year lows. What would happen under different conditions?
Eagle Rock Energy (Nasdaq:
is paying 5.2% and has had a total of return of 128% in the past
Since September 2010
Universal Healthcare Trust (NYSE:
has returned 38%, thanks in part to a 5%-plus yield.
Action to Take -->
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.
In the sizzle of the mainstream financial media, it's the
fast-moving names like
that don't pay dividends and yet get most of the headlines. But as
you can see, it may just be the dividends that are most important
to your success.
-- Carla Pasternak
P.S. -- If you're an income investor, why would you buy a stock
yielding 2% when you can find one paying 26% right here? Watch this
presentation for more.
Disclosure: Neither Carla Pasternak nor StreetAuthority, LLC
hold positions in any securities mentioned in this article.
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