How To Get A Lifetime Of Income Growth And Capital Gains
In a recent article, I told you all about my strategy for maximizing income by investing in stocks that fall in the high-yield “sweet spot.” They aren’t the absolute highest yielding stocks on the market, but this special group of stocks has outperformed all others, and returned an average of 14% per year over the past 86 years.
And while these stocks are a key part of my portfolio — and consistently provide my subscribers with ample dividend checks — “maximizing yield” is just one aspect of my three-part Daily Paycheck system.
I like to call the second group of stocks “Fast Income Growers.” These are the few companies that I think you could buy today and potentially hold for the rest of your life. And while you hold them, they can shower you with bigger and bigger dividends year in and year out…
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These stocks have one very distinct characteristic — they are generally dominant companies with growing cash flows that you can depend on to pay — and increase — their dividends year after year.
In other words, you likely won’t get a 10% yield from any of these companies right away. Instead, Fast Income Growers start out with smaller yields, but grow their dividends at a fast clip — sometimes even doubling them in just a few years.
So a good yield can often become an incredible yield over time.
Take a look at one of my favorite holdings, Magellan Midstream Partners (NYSE: MMP).
For those of you who don’t know, MMP is a master limited partnership (MLP) that owns and operates thousands miles of energy pipelines as well as storage terminals all over the United States. Due to the company’s unique pass-through structure and nature of the business (which is largely fee-based), it’s one of the most reliable companies I’ve ever come across…
When we bought Magellan Midstream Partners for the Daily Paycheck portfolio in February 2010. At the time, the stock was trading for about $20 per share and it had a solid yield of 5.6%.
Not bad. But that’s not the big story here.
You see, Magellan has relentlessly increased its quarterly dividend since then — 38 times to be exact — for an increase of 185%.
Its most recent quarterly payement was $1.013. That gives anyone who bought the company back when we did a yield of 20% on their original investment ($1.013 x 4 = $4.052; $4.052 / $20.32 purchase price = 19.9%.)
And since MMP is a Fast Income Grower, there’s no reason to think it shouldn’t continue increasing its dividend for years to come.
But let me be clear: A bigger dividend is just one area of growth this stock has provided.
From the time we added Magellan to the portfolio until today, we’ve enjoyed a total return of 416%, while the market has only returned about 175%.
All that from a “boring” dividend payer. All we had to do was simply reinvest our dividends and let MMP pay us more and more each year.
And that’s been the case with many of my other Fast Income Growers as well.
In fairness to my paid subscribers, I can’t show you the names of all of them. But others in my portfolio have returned 109%… 266%… even 655%.
On average, this portion of my Daily Paycheck portfolio has delivered a total return of 74.6%. And the average holding yields 4% — for now…
Action To Take
Not only do Fast Income Growers increase their dividends — but their share prices tend to rise at a faster clip than your average dividend stock.
That’s why they’re perfect if you want a rising stream of income coupled with large gains.
Now, as you might expect, Fast Income Growers are pretty rare. I search for them every month, and trust me, they’re not easy to find. I comb through thousands of companies to generate a list of stocks with solid dividend growth track records. Then I dig into annual reports and SEC filings. I look at everything from historical dividend payout ratios to a company’s competition and pricing power.
After I’m done with my investigation, there are only a handful of stocks left that make the cut. In fact, only a few dozen have made it into the portfolio since 2009.
But if you buy these stocks today, my experience shows that within five to six years, your income could double.
My staff and I recently updated a special presentation that explains how my Daily Paycheck strategy works in greater detail. I encourage every reader who is interested in turbo-charging their income to check it out. Click here to see it now.