The 3 Pillars of Easy Income Investing
It’s no secret saving for a rich retirement is a daunting goal…
Most folks squirrel away what they can and hope it’ll be enough once it’s time to hang up their spurs.
Most times, however, it’s not.
That’s why today I want to recap a few issues from last week that lay out the three most important pillars of income investing.
Once you know how to use these strategies and see how much money you could earn with them…
You’ll be all in on boring ol’ income investing.
Pillar 1: High-Quality Dividend Stocks
The first pillar of income investing is owning a basket of high-quality dividend stocks.
A dividend is a distribution of a portion of a company’s earnings — paid regularly (typically quarterly) to a company’s shareholders.
And for savvy income earners, dividends are one of the smartest and easiest ways to secure to the extra cash needed to pad your retirement or enjoy life’s luxuries.
Just keep in mind there are thousands of companies on the market that pay out dividends. It’s one of the safest and most reliable ways to grow your income.
But not all companies are the same. There are two very important criteria I look for when it comes to the companies paying out the best dividends:
- A dividend yield of 2% or higher.
- A low dividend payout ratio (click here for a full explanation)
Pillar 2: Direct Stock Purchase Plans
Did you know there’s a way to bypass Wall Street completely, bypass brokers altogether and invest directly in some of America’s best blue chip dividend stocks?
Direct stock purchase plans (DSPPs) allow you to buy stock directly from the companies you most want to invest in and cut out the middlemen from the transaction.
Walmart, Honeywell, McDonald’s, 3M, Home Depot and Microsoft are just a few examples of many blue chip companies offering you the option to invest directly using a DSPP, and this strategy will help you keep your hard-earned cash in your hand and not some middleman’s.
Pillar 3: DRIPs
Wall Street is rigged against the “little guys” like you and me.
But I’ve cracked the code on one of Wall Street’s best-kept secrets.
The secret is known as dividend reinvestment plans (DRIPs).
DRIPs typically give out 100–200% more than a typical dividend would over time! The kicker is companies cannot advertise their DRIP programs.
With DRIPs, instead of receiving a traditional cash payout from your dividend investment, you actually reinvest that money back into the company and purchase additional shares.
Plenty of companies operate their own reinvestment plan. Once your initial stock is purchased, you should then have the option to enroll in their offered program.
By cutting out the middleman, you avoid paying any fees that it would take to cash out and reinvest on your own.
How These 3 Pillars Work to Make You Rich
Here’s a great example of how the three pillars of income investing could exponentially increase your profits using one of my favorite stocks: Coca-Cola (NYSE: KO).
Let’s say you invested $5,000 in KO shares 11 years ago. Your investment today, after a 2-for-1 split in 2012, would be worth a total value of about $8,600!
That’s a not-too-shabby $3,600 gain. And roughly two-thirds of that profit, or $2,350, came from cash dividends alone!
But if you also use DRIPs with our example, essentially reinvesting your dividends into more shares (that will also pay more dividends) your original $5,000 stake would grow to about $11,000 today.
A $6,000 profit!
That’s two-thirds more money in your retirement account for barely lifting a finger!
And if you cut out the middleman using pillar No. 2 (DSPPs), you’ll save money while earning more because you won’t have to pay broker fees.
Bottom line: Every hotshot on Wall Street owns a basket of high-quality dividend stocks, invests with DSPPs and utilizes DRIPs to max out their earnings.
Why aren’t you?
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch