3 Payout Loopholes to
Triple Your Income
Discover hidden dividend streams that
are “invisible” to 99% of investors.
So far this year, the Dow is down by nearly 9% and the S&P has lost more than 7.5% of its value.
The S&P 500 dividend pays barely 2% while the 10-year U.S. Treasury bond returns a meagre 2.2%.
Performance like this has dashed the hopes of even the most optimistic income investors.
Finding stable income payers to support your lifestyle or safely grow your nest egg may seem virtually impossible.
But the potential for profit is out there, you just have to know where to look…
… and it’s much easier to find than you might expect.
My name is Brett Owens and I’m an unabashed dividend investor. Ever since my days at Cornell, and all through my years as a startup founder in Silicon Valley, I’ve had a passion for safe, stable yields.
For the last 10 years, I’ve been investing my startup profits through a proprietary system that uncovers 8%, 9%, even 10%+ yields, using three very simple dividend payout loopholes:
#1 – Invisible dividends: Payouts of 7% or better that financial sites like Yahoo! Finance aren't even aware of.
#2 – Buying yield: Purchasing alongside savvy management teams that are all-but-guaranteeing EPS growth.
#3 – Hitting the double-digit sweet spot: Matching the ideal combo of dividend yield and growth to get 10%+ initial yields in less time.
Most regular investors don’t know how to take full advantage of these strategies, yet they’re so simple virtually anyone can use them with amazing results.
They don’t involve options trading and there are no obscure tax issues or forms involved. If you simply understand what they are – and how to play them – you could increase your income by 150% or more.
In the next few minutes you’ll learn the secret behind all three loopholes AND the exact steps you can take to achieve double-digit yields, even in today’s 2% world.
But first, I want to tell you why I’m such a fan of dividends…
Dividends Deliver 90% of Stock Returns
Studies by two global investment heavyweights, BlackRock and GMO, have shown that 90% of U.S. equity returns over the past 100 years have been thanks to dividends and dividend growth.
Ned Davis Research also conducted its own 43-year study on stock returns (from January 1972 through December 2014). The conclusion? You’re only going to make money if you buy stocks that pay dividends:
Dividends Required to Beat Inflation (Ned Davis Research)
43-Year Annual Return
Stocks that didn’t pay a dividend barely kept up with inflation, while stocks that paid a growing dividend delivered double-digit returns. Over time, this compounding really adds up:
Dividend Payers Pull Away Quickly Over Decades
Most recently from 2000-2012, dividend paying stocks outperformed the broader S&P 500 more than four-fold during a period that included two nasty bear markets. The dividend payers returned a respectable 7.7% annually versus just 1.7% for the S&P 500:
It’s obvious what you need to do to make money in stocks: You need to buy stocks that pay dividends.
Historically, that’s been the foolproof formula. But historically, the S&P 500 paid 4.4%.
Today’s Problem: The S&P 500 Pays Just Over 2%
If you’re screening for high yielding stocks on your favorite financial site such as Yahoo! Finance, you’re not going to find many yields worthy of your money. Less than 40 stocks in the S&P 500 pay more than 4%. And many of these companies are at risk of dividend cuts due to shaky earnings outlook.
The lack of safe 4% payers probably has you concluding that you’re not going to be able to build a portfolio that delivers secure high single-digit returns or better.
That’s a logical conclusion if you’re “just” looking at things at face value. However, some of these stated yields are actually understated by 50%… 75%… or more.
Which means these stocks appear to yield, say, 2%… while actually paying out 7% or better annually!
For example, one of my favorite dividend payers has a reported yield of 2.8%. But the company actually pays 7% annually in cash to its investors.
In a moment I’ll show you how you can receive a free copy of my special report on this stock, A Steady 7% from the Company with Too Much Cash, which includes the ticker , buy-under price and detailed analysis on why I think it’s such a great opportunity.
But first, let’s discuss why these payouts are available in the first place. We actually have three accounting loopholes to thank for the opportunity to collect real, meaningful yield in today’s low-interest-rate-world.
Payout Loophole #1: “Invisible Income”
Most investors settle for traditional quarterly dividends. They might perform a basic stock screen and buy the run-of-the-mill S&P 500 stock, which pays 0.5% quarterly (or 2% annually). For example, take a look at Apple – which has plenty of earnings power to pay:
Where’d Yahoo! Finance get that yield from? It took Apple’s last quarterly dividend of 52 cents per share and multiplied it by 4.
I don’t need to tell you that this isn’t very much income. It can easily be lost in a volatile last hour of trading these days.
To stay ahead of the market, and inflation – and actually collect income that you can save or reinvest – you must do better than 2 or 3%.
Payout Loophole #1 does exactly that with what I like to call “invisible income”, because most of their cash distributions never show up on Yahoo! Finance or many other stock screening tools.
You may have already heard of the these distributions by another name: Special Dividends.
These are typically one-time payouts that companies give to shareholders following a period of high earnings, a recent windfall or when making changes to its financial structure.
Some companies, however, consistently pay special dividends like clockwork every year… or even multiple times a year… but most investors will have a hard time finding them.
Let me show you an example of what I mean…
Invisible Dividends Deliver 9.2% Annual Return
Last October, a colleague and I came across a small holding company with a stated yield of 2.5%. It was a product of its then 7.5 cent quarterly dividend. As you can see in the chart below it’s paying 2.82% today, which is still not terribly exciting yet – but stay with me.
The problem with this stated yield was that it only represented 40% of the money the company had put in shareholders’ wallets in previous years! Yahoo! didn’t include these two payments because they were technically “one-time” in nature:
November 19, 2014
June 10, 2015
Thanks to these special payouts, management gave investors 51 cents per share more than financial websites are reporting. This totals up to an actual yield of 7% over the last 12 months (“hidden” dividends in bold):
November 5, 2014
November 19, 2014
February 4, 2015
April 29, 2015
June 10, 2015
August 5, 2015
Even though this company has paid investors a special dividend every year since 2011, it still doesn’t “count” as a regular dividend in the eyes of the financial media. So, it continues to pay under the radar. Shareholders earn 7%, while investors continue to overlook this stock because it appears to yield less than 3%.
Since my original recommendation back in October, we’ve earned an easy 7% in cash. With price appreciation over that time we’ve achieved a total return of 9.2% in less than a year (outpacing the S&P 500’s 2.5% return four-fold).
(I’m recommending this pick to my premium subscribers so it would be unfair to reveal the name here. I have put together a special report for you called “Invisible Dividends: How to Uncover 7% Yields in Today's 2% World” that will show you how to locate companies like this one. Keep reading to find out how you can get your copy absolutely free.)
Now you may be wondering why the company wouldn’t just bump its quarterly dividend to garner more attention from Wall Street?
The big advantage of the special dividend model is that it preserves financial flexibility. While Wall Street loves companies that continuously increase their dividends (as shown by their 10.1% return over the last 43 years) it hates companies that cut dividends. Recent dividend cutters like Consol Energy (CNX) and Wynn Resorts (WYNN) saw their share prices decrease by 50% and 21% respectively in the months following their payout reductions.
This financial flexibility also gives management the opportunity to take advantage of our second loophole. At certain times, this can be a more lucrative option for shareholders. It’s a fairly recent option, too, because it’s only been legal in this country since 1982…
Payout Loophole #2: “Fixing” Earnings Growth
Stock prices can do anything in the short term, but over the long run, they tend to follow earnings growth. Most investors know this – but there’s a small yet critical nuance they miss when chasing earnings growth.
Stock prices are quoted per share. When you buy a stock, you’re not buying the entire company. Instead, you’re buying a very small percentage as represented by your shares.
As a shareholder, it’s actually irrelevant to you whether or not your company’s earnings go up in absolute terms. What matters to you is that its earnings per share go up year-after-year.
Perennial earnings growth is a tall mandate. But perennial earnings per share growth is actually a much easier hurdle to scale – thanks to the repeal of the Securities Exchange Act of 1934.
That law was created to keep a company from manipulating its own stock price via large-scale stock repurchases. Remember, stock prices work like all prices – they are a function of supply and demand. For 48 years, companies were prohibited from pumping up the demand for their own shares – by buying them from the open market themselves and taking them out of circulation.
It was a heavy-handed move in the wake of the Great Depression but, in November 1982, SEC Rule 10b-18 changed this. Now companies have more leeway in exercising share buybacks, but with more specific limitations that still restrict bad players. It gave the OK for companies to purchase their own stock shares on the open market – provided they didn’t buy more than 25% of the stock’s average daily volume. This is a huge ceiling that basically lets companies purchase as much of their own stock as they’d like.
The implications are significant for investors like you and me. It means a company can all-but-guarantee earnings per share growth simply by taking enough shares off the market.
Buybacks have actually overtaken dividends in terms of how companies return cash to shareholders. In 2013, repurchases accounted for 60% of all cash returned to shareholders.
What kind of returns can share buybacks deliver to shareholders? As with any stock purchase, the value you receive is a function of what you pay. Companies that buy their shares back on the cheap can easily achieve double-digit price growth. On the other hand, management teams that overpay for their own shares can actually destroy value.
Regardless of price paid, companies that buy back at least 5% of their net outstanding shares yearly (as tracked by the PowerShares Buyback Achievers Portfolio) have outperformed the broader market by more than 20% since 2007:
Even “Dumb” BuyBack Indexes Outperform the S&P 500
If this is what a broad screen returns, can you imagine what a smarter set of criteria can do?
Over the last 10 years I’ve developed a system for identifying buyback programs that are most likely to deliver shareholders the most bang for the company’s buck.
Let me tell you about one play this system recently uncovered…
Buybacks Help a 3% Grower Return 9.5%
Back in December, we recommended General Mills (GIS) to readers as a safe income play. On the surface, this company looked like dead money. It was paying a mere 3.1% while only growing sales at 3% annually.
You probably don’t need me to run the numbers to show that 3% annual growth on a 3.1% payout is going to take forever to add up to much.
But Wall Street was missing a couple of key points about GIS:
- The company was growing earnings slightly faster than sales (by mid-single digits) thanks to cost cutting. And most importantly:
- It was buying back its own cheap shares like crazy.
The share buybacks (it averaged a 4.4% “buyback yield” over the past decade) were creating a virtuous cycle for shareholders. The company was able to boost earnings-per-share by high-single digits while affording higher and higher dividend increases because it had less shares to pay out on.
This resulted in a secure 9.5% gain for shareholders within 10 months (while the S&P lost 2.8% over the same time period).
You can get access to all of the details on how to profit from buybacks, including my 3-step Buyback Yield Screener, in my report “Shareholder Yield: How to Identify Double-Digit Returns From Buybacks.”
More on this in a bit. But first, let’s talk about the third loophole for hidden yields that most investors miss.
Payout Loophole #3: Einstein’s Favorite
It’s been said that Albert Einstein once referred to compound interest as the 8th wonder of the world. Whether or not he actually said it is up for debate, but that statement rings true when you consider the power of Loophole #3.
When applied to dividends, some pundits will claim that dividend growth is all that matters – thanks to the powers of compounding. And the Ned Davis numbers back this up, with dividend growers returning 10.1% over their 43-year time period.
Modern day Dividend Aristocrat disciples have taken this doctrine to the extreme. They buy any stock that pays an ever-increasing dividend – regardless of the absolute yield, or the rate of growth.
This is far from optimal. It will take a 2% payer significant time to pay you 10% or more on your initial investment, regardless of the rate of dividend increases. But it could take a 5% payer two decades to double its dividend with a 3% annual increase. And in today’s “desperate for dividends” investment classifieds, even the slow growers get attention as aristocrats.
In reality, there is a sweet spot where yield today and growth tomorrow will deliver you the most income in the years ahead. Let me show you what I mean…
The Road to Double-Digit Yield in a Decade
Four years ago, I recommended that income investors buy Walmart and be patient. Its dividend was a modest 2.8% at the time, but given the growth I anticipated, I promised patient investors double-digit yield within a decade on their original capital.
At the time, WMT was paying 36.5 cents per share in dividends. Today, it pays 49 cents. That’s an increase of 34% over four years for a yield of 3.8% on initial capital. While shareholders were getting paid to compound, they earned a total return of 24% over that four-year period as investors flocked to Dividend Aristocrats like WMT and bid up its price.
My new special report, “Dividend Raisers: Lock in Tomorrow’s Yields Today”, reveals exactly how to play this loophole for maximum profits. I’ll tell you how to get your copy absolutely free in just a moment.
But first, you need to be careful…
Don’t Make These Common Mistakes
Novice income investors buy only for stated yield, without considering the business fundamentals of the company they’re buying. Big mistake. As we discussed earlier, companies that cut their dividends can drop 20% in no time.
More mature but still adolescent income investors will look at historical growth rates and apply them into the future. They consider past performance… but they still don’t consider the underlying business. This is a slightly better approach – but not by much.
Advanced income investors don’t skate to the current (and possibly understated) yield. They consider where the dividend is heading, and they smartly secure future income.
Remember, it’s future earnings growth that drives future dividend growth.
You can’t be a successful income investor without successfully forecasting future earnings growth. Now let’s talk about the easiest way for doing this.
How I Uncover These Invisible Dividends
I’ve developed a system that identifies hidden dividend opportunities. It’s based on my own proprietary software algorithm that calculates a variety of factors, including company earnings power (which is critical as this is what drives future dividend payments and growth).
This system recently turned up several remarkably safe opportunities hiding in plain sight. So many, in fact, that I see no reason for well diversified yield-seekers to settle for less than 7%+ yields any longer.
How YOU Can Profit from These Payout Loopholes
If you haven’t already put these strategies to work in your portfolio… or maybe you have but are looking for a more effective system to uncover them… I encourage you to take a 60-day test drive of my new research service Hidden Yields.
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In fact, it’s the very same system I used to uncover all of the incredible yields I mentioned above, including the 9.2%, 9.5% and 9.7% returns in under a year, and the 24% total return which still has plenty of room to run.
Hidden Yields goes beyond the surface data that most dividend investors live by, providing you with only the safest, most stable income each month.
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Of course you may be hesitant about trying a brand new service, and I want you to be certain this is worth your time and effort, so…
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Free Special Report #1:
Invisible Dividends: Uncover 7% Yields in Today's 2% World
Most stock screening tools ignore special dividends as they’re considered “one-time” payments. But some companies pay them like clockwork every year… or even multiple times a year. This report reveals three such payers, including my favorite, which paid out an “extra” 154% in just the past year.
Free Special Report #2
Shareholder Yield: How to Identify Double-Digit Returns From Buybacks
Buybacks, when done right, can create massive shareholder value. They can increase stock prices by double-digits and turn into a virtuous cycle in which continuously lower share counts all-but-guarantee earnings-per-share (EPS) growth.
This report reveals my 3-step “Buyback Yield Screener” to help you separate the winners from the losers. Plus you’ll see the exact steps for a 10.1% annual gain.
Free Special Report #3
Dividend Raisers: Lock in Tomorrow’s Yields Today
Learn how to find the sweet spot between yield today and growth tomorrow to get the most income in the months and years ahead. I’ll show you exactly how I screen stocks, scrutinize earnings history and make sure you get in at a good price, (just like that 24% total return we bagged from a single trade).
These reports give you all the step-by-step details you need to unlock your own hidden income. But I’m sure you’re excited to get started right now, so let me throw in one more bonus report that will hand you…
An “Instant” 2% By The Holidays
Remember the special dividend payer we were discussing earlier? Last November, management paid shareholders a 2% special dividend just before the Holidays. It’s probably going to issue another payment within the next month or two – which makes now the perfect time to buy this stock.
This special report, “A Steady 7% from the Company with Too Much Cash”, gives you everything you need to know, including the company name, ticker, buy-under price and the full backstory on why I like it.
Now you may be wondering what a service like this is going to cost…
Profitable Advice That Doesn’t Cost a Fortune
The special reports you’ll get absolutely free could sell for hundreds of dollars each.
And even that would be a bargain compared with the yield I’m looking for in my very next pick.
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Yours in profits,
Chief Investment Strategist
P.S. Recent market pullbacks have created a number of excellent buying opportunities, but this won’t last long. I encourage you to get started right now to ensure you can get into my favorite income stocks at a good price.
P.P.S. Remember, your risk-free Charter Membership also comes with the full details on that 2% special dividend I’m expecting in just a few weeks. Along with their regular quarterly dividend in early November, even a small position in this stock would yield more than enough to cover a full year’s membership… before your 60 day trial even ends!