Dividend investing is changing.
Over the past decade, many dividend-paying companies have
slowly trended away from paying traditional dividends.
Don't get me wrong, many long-time dividend payers will keep
paying and growing their dividends into the future. But certain
ones are starting to reward shareholders in two other, more
Fortunately for investors, these two hidden, "extra payments"
could be much more valuable than traditional dividends alone. (I
recently talked about each of these extra payment types
#-ad_banner-#That's why over the past few weeks, I've been
telling you about a new way to invest in dividend-paying
It's the single best way I know to get market-beating
returns from your
, as I'll show you in today's example.
It's called Total Yield investing.
I call it that because it looks at all the ways a company
rewards shareholders. This not only includes dividends, but also
accounts for two other "extra payment" metrics: stock buybacks
and debt paydown.
You're familiar with how dividends work. If you invest $100
into a stock with a 10% dividend yield, you can expect to receive
$10 in dividends (or 10%) a year from that investment.
The other two "yields" are a bit more complex. The data to
calculate these yields isn't posted blatantly like a dividend
yield is on a stock ticker page. Instead, we must find this data
deep with a company's financials.
But don't worry, all you need to know about these two other
yields is this:
they are vital ingredients that take a dividend stock from
being simply "average" to market-beating
Let's look at a top Total Yield stock from my latest research
report (which you can find in
) as an example.
Ameriprise Financial (NYSE:
is an investment firm that dished out $401 million in dividends
in 2013, which gave it a 2% dividend yield (you'd find this on
any financial website, plainly posted).
A 2% dividend yield is nothing to get excited about. But upon
closer inspection, you'd find that Ameriprise paid nearly $1.5
billion in stock buybacks in 2013 -- more than three times what
it paid in dividends. You can see this in the company's cash flow
statement, which is partially shown below (USD shown in
I won't bore you with the calculations, but when you combine
Ameriprise's 2% dividend yield with the company's buybacks over
2013, the stock carried a respectable Total Yield of 6%.
These extra payments -- buybacks in this case -- made shares
more valuable throughout the year. What the Total Yield idea does
is simply measure that "hidden" value that's added to a seemingly
pedestrian dividend payer.
Naturally, you can see how these shareholder-friendly moves in
2013 worked for Ameriprise shareholders in the chart below.
The S&P 500 may have had a good year last year, but
Ameriprise trounced it,
tripling the market's return.
Home Depot (NYSE:
) is another favorite Total Yield stock I mentioned in a previous
. It pays a modest 2.4% dividend yield, but also paid $17 billion
in the form of share buybacks from 2009 to the end of 2013.
Over that time period Home Depot's share price soared 311% --
crushing the S&P 500's 104% return.
These are just two examples of many that show how a
dividend-only approach can actually hold you back from seeing
higher stock returns. It causes you to miss out on stocks like
Ameriprise and Home Depot -- stocks that may only yield a modest
amount, but when combined with these other two metrics, they
crush the overall market.
My latest research shows that last year, 24 out of 25 of the
stocks with the highest Total Yield ratings
more than doubled the S&P 500's return
. For this year, I've targeted a handful of Total Yield stocks
that I expect to do well in my new report, "
The Top 5 Total Yield Stocks For 2014
Put simply, the two extra payments that lead to the best Total
Yield stocks may be hidden in a company's balance sheet. But make
no mistake, they matter. And choosing to invest in a
dividend-paying company that gives out these extra payments over
one that doesn't
can mean the difference between beating the market or
just keeping pace with the crowd.
-- There's a lot more to tell about the success I've had with the
Total Yield strategy in finding quality dividend stocks. In my
latest report, "
The Top 5 Total Yield Stocks For 2014
," I talk about a rapidly-growing financial company that boasts a
dividend yield of 7.5% and an even higher Total Yield, plus a
dominant global retailer that's soared 143% since 2011. To learn
more about my Total Yield strategy -- and get access to this
visit this link