You may or may not have heard of renowned money manager Joel Greenblatt. Over an illustrious career spanning more than twenty years, the Gotham Capital hedge fund manager racked up annualized returns of 40%, eclipsing the success of even his mentor, Warren Buffett. Investors who were on board with Greenblatt for his entire tenure at Gotham would have seen a $10,000 investment balloon to more than $8 million, earning 800 times their initial stake. #-ad_banner-#His remarkable track record didn’t happen by sheer luck, but rather through his focus on investing in a unique group of companies that shared one commonality. Read More

You may or may not have heard of renowned money manager Joel Greenblatt. Over an illustrious career spanning more than twenty years, the Gotham Capital hedge fund manager racked up annualized returns of 40%, eclipsing the success of even his mentor, Warren Buffett. Investors who were on board with Greenblatt for his entire tenure at Gotham would have seen a $10,000 investment balloon to more than $8 million, earning 800 times their initial stake. #-ad_banner-#His remarkable track record didn’t happen by sheer luck, but rather through his focus on investing in a unique group of companies that shared one commonality. Industry leaders like American Express, Liberty Media, Allstate, Expedia and Kraft Foods all carry this trait. And they each helped Greenblatt and fellow investors make millions… These companies are just a few of a long list of spin-offs that all once belonged to larger parent companies. And they all flourished after leaving the nest. Take spin-off biopharmaceutical maker AbbVie (NASDAQ: ABBV) for example. Since officially leaving its parent company, Abbott Laboratories, in January 2013, ABBV has risen more than 65%… beating the market by roughly 30%. Here’s another example. Just over two years ago, ConocoPhillips separated its upstream oil and… Read More

The 30-year U.S. Treasury Bond is quite possibly the worst investment option out there right now… even your Uncle Dave’s coin and baseball card collection might offer better long-term returns. Let’s forget for a moment about the Fed’s tapering of Quantitative Easing, which has already placed upward pressure on interest rates (and thus downward pressure on bond prices). And let’s forget that the longer a bond’s duration, the greater its sensitivity to interest rate movements. So with every basis point uptick, nothing will feel the pain more acutely than the 30-year “long bond.” Let’s even forget that Uncle Sam’s credit… Read More

The 30-year U.S. Treasury Bond is quite possibly the worst investment option out there right now… even your Uncle Dave’s coin and baseball card collection might offer better long-term returns. Let’s forget for a moment about the Fed’s tapering of Quantitative Easing, which has already placed upward pressure on interest rates (and thus downward pressure on bond prices). And let’s forget that the longer a bond’s duration, the greater its sensitivity to interest rate movements. So with every basis point uptick, nothing will feel the pain more acutely than the 30-year “long bond.” Let’s even forget that Uncle Sam’s credit rating has already been downgraded by at least one ratings agency. #-ad_banner-#Even if interest rates don’t rise and Congress miraculously balances the budget — a best-case scenario — you’re still tying up your capital for the next three decades at a paltry rate of around 3.5%. But here’s the kicker: when your principal is finally repaid in the distant future, those dollars will have lost much of their purchasing power. Just ask anyone who bought one of these bonds back in 1983. Maybe they loaned the government $30,000, enough money to buy three average new cars at the time. Now,… Read More

This year is shaping up to be a good one for those using a Total Yield strategy. For those who aren’t familiar, it’s a simple strategy I’ve been talking about for the past few weeks. I’ve been telling income investors that if they’re investing in just any company that pays a dividend, they may be leaving a lot of money on the table. That’s why instead of simply focusing on companies with high dividend yields, the Total Yield strategy looks at companies that reward shareholders with two “extra” payment methods in addition to dividends — ones that add rocket fuel… Read More

This year is shaping up to be a good one for those using a Total Yield strategy. For those who aren’t familiar, it’s a simple strategy I’ve been talking about for the past few weeks. I’ve been telling income investors that if they’re investing in just any company that pays a dividend, they may be leaving a lot of money on the table. That’s why instead of simply focusing on companies with high dividend yields, the Total Yield strategy looks at companies that reward shareholders with two “extra” payment methods in addition to dividends — ones that add rocket fuel to a dividend stock’s potential returns. (I talked about each of these “extra” payment methods in detail here and here.) #-ad_banner-#It’s simple. Investing in dividend-paying companies that give out these two “extra” payments over ones that don’t can mean the difference between merely keeping pace with the market and beating it. Here’s the proof: from 1982 to 2011, the Total Yield strategy returned 15.04% annualized, handily outperforming the S&P 500, which returned 10.96% annualized over the same period. Extensive back-tested research has shown that by using the Total Yield strategy — choosing stocks that pay dividends, buy back shares of… Read More

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 tax-friendly ways. 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 here and here.) #-ad_banner-#That’s why over the past few weeks, I’ve been telling you about a new way to invest in dividend-paying… Read More

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 tax-friendly ways. 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 here and here.) #-ad_banner-#That’s why over the past few weeks, I’ve been telling you about a new way to invest in dividend-paying stocks. It’s the single best way I know to get market-beating returns from your dividend stocks, 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… Read More

There’s no other way to put it. If you’re a dividend investor, chances are you’ve been duped… As an experiment, I ran a simple stock screen. Out of 14,266 stocks and ADRs listed on U.S. exchanges, just 181 offer yields above 9%. And most are questionable companies like over-the-counter stock Xstelos Holdings (OTC: XTLS), which, incidentally, has lost 47% of its value over the past year. That means 14,085 stocks pay less than 9%. In other words, less than 1% of stocks are double-digit yielders today. But that’s just the start… Right now the average dividend yield of a given… Read More

There’s no other way to put it. If you’re a dividend investor, chances are you’ve been duped… As an experiment, I ran a simple stock screen. Out of 14,266 stocks and ADRs listed on U.S. exchanges, just 181 offer yields above 9%. And most are questionable companies like over-the-counter stock Xstelos Holdings (OTC: XTLS), which, incidentally, has lost 47% of its value over the past year. That means 14,085 stocks pay less than 9%. In other words, less than 1% of stocks are double-digit yielders today. But that’s just the start… Right now the average dividend yield of a given stock trading on U.S. exchanges is 2.2%. That’s less than half of the historical average, which comes in at 4.45%. See for yourself… #-ad_banner-#Where have all the dividends gone? While it wasn’t easy to find, months of research finally led to an answer. Most investors aren’t being told about the two “extra” payment methods a handful of dividend-paying companies are using. Unlike dividends, these extra payment methods are under the radar, buried in company financial statements. But find the right companies that pay them, and you could get returns up to three times higher than you could from… Read More

They’ve officially become more popular than dividends. Top companies are shelling out these extra payments in droves. The goal is to give shareholders more bang for their investment buck than dividends alone. They are a favorite of Warren Buffett and many other billionaire investors. #-ad_banner-#There’s a good chance you’ve received one of these “tax-free dividends” before and didn’t even realize it. That’s because they’re buried in a company’s financial statement. But since 1982, when the SEC enacted a rule called 10b-18 as a measure of boosting the economy, these “tax-free dividends” have become a favored form of payment among shareholders. Read More

They’ve officially become more popular than dividends. Top companies are shelling out these extra payments in droves. The goal is to give shareholders more bang for their investment buck than dividends alone. They are a favorite of Warren Buffett and many other billionaire investors. #-ad_banner-#There’s a good chance you’ve received one of these “tax-free dividends” before and didn’t even realize it. That’s because they’re buried in a company’s financial statement. But since 1982, when the SEC enacted a rule called 10b-18 as a measure of boosting the economy, these “tax-free dividends” have become a favored form of payment among shareholders. And companies have responded. Just look at the chart below to see how companies have been paying shareholders since 1982, especially since 2005 (hint: it hasn’t been just with traditional dividends)… Now, not every company pays these “tax-free dividends.” So just which companies are making these extra payments… and how can you start receiving them today? The easiest way to identify which companies are making “tax-free dividend” payments is to explain the payment method itself. As I mentioned, its roots trace back to 1982. It was an awful time for the U.S. economy. We were in a recession,… Read More

When it comes to beating the market, dividends have always reigned supreme. If you’d invested $100,000 in the S&P 500 back in 1982, it would have been worth $2.3 million by the end of 2011. If you would have invested that same amount in dividend payers, you’d have $4.3 million. Not bad. That’s where most investors stop. But if you’d invested the same amount of cash using a simple strategy that too many investors often ignore, then it would have been worth $6.7 million. #-ad_banner-#Many investors searching for the best total returns will simply look for… Read More

When it comes to beating the market, dividends have always reigned supreme. If you’d invested $100,000 in the S&P 500 back in 1982, it would have been worth $2.3 million by the end of 2011. If you would have invested that same amount in dividend payers, you’d have $4.3 million. Not bad. That’s where most investors stop. But if you’d invested the same amount of cash using a simple strategy that too many investors often ignore, then it would have been worth $6.7 million. #-ad_banner-#Many investors searching for the best total returns will simply look for stocks with high dividends. That makes sense. But dividends don’t tell the whole story — not even half of it. If you’re looking for more cash from your investments, you should be looking at all of the ways a company distributes its cash. Don’t get me wrong — dividends can be a great indicator of company health. From 1972 through 2011, members of the S&P that don’t pay dividends returned just 1.4% per year, turning a $1,000 investment into just $1,710 according to research by Ned Davis. Meanwhile, companies that pay dividends returned 8.6% annually — significantly more than those… Read More

Imagine walking into a casino and taking a seat at the nearest roulette table. You set down a $100 bill, receive four green $25 chips, and proceed to stack them all on red. If the ball lands on a red number, you instantly double your money. If not, you lose it all and walk away with nothing. The croupier gives the wheel a spin, lets the ball fly, and waves his hand over the table to signal no more bets. The adrenaline starts pumping as you watch the ball bounce from slot to slot, finally settling on… 20 black. Your… Read More

Imagine walking into a casino and taking a seat at the nearest roulette table. You set down a $100 bill, receive four green $25 chips, and proceed to stack them all on red. If the ball lands on a red number, you instantly double your money. If not, you lose it all and walk away with nothing. The croupier gives the wheel a spin, lets the ball fly, and waves his hand over the table to signal no more bets. The adrenaline starts pumping as you watch the ball bounce from slot to slot, finally settling on… 20 black. Your chips are unceremoniously scooped up. That was fast. #-ad_banner-#But wait. This is no ordinary roulette wheel. The dealer decides to reimburse you for your play and gives you $40 back. Emboldened, you pocket the chips and lay down another Ben Franklin on the table for a second spin. This time Lady Luck smiles on you. The ball lands on 5 red. The dealer doubles your bet and pushes $100 toward you. But once again, he gives you an extra $40 bonus just for playing. The laws of mathematics say this is a “can’t-lose” proposition. Guess wrong, and you still get… Read More

The market is obsessed with fast-growing companies. And you can’t blame it really. All things equal, everyone would rather invest in a business that is thriving and expanding rather than one that is stagnant or deteriorating. Even if you’re not a growth investor per se, you have to appreciate a company whose products or services are really catching on. Because if sales are rising, then so are profits. At least, that’s what’s supposed to happen. But it doesn’t always work out that way. #-ad_banner-#Take online retailer Overstock.com (Nasdaq: OSTK). Back in 2003, the company took in $239 million in sales,… Read More

The market is obsessed with fast-growing companies. And you can’t blame it really. All things equal, everyone would rather invest in a business that is thriving and expanding rather than one that is stagnant or deteriorating. Even if you’re not a growth investor per se, you have to appreciate a company whose products or services are really catching on. Because if sales are rising, then so are profits. At least, that’s what’s supposed to happen. But it doesn’t always work out that way. #-ad_banner-#Take online retailer Overstock.com (Nasdaq: OSTK). Back in 2003, the company took in $239 million in sales, but fell just short of breakeven and lost $12 million. Flash forward to 2008 and revenues had climbed to $834 million. But net income that year was almost the same, actually a little worse, negative $13 million. Revenues rose by $595 million (149%) over that five-year period. But remarkably, not a single dollar of the extra half-billion in sales made it to the bottom line. How is that possible? Well, cost of goods sold increased from $213 million to $691 million. As a percentage of sales, that’s a modest improvement from 89% to 83%. Still, it only left a gross… Read More

For the past few months, I’ve been telling readers of my High-Yield Investing newsletter about the secrets of America’s privileged. You see, wealthy folks in the U.S. invest differently than most of us. And I believe it’s worth examining their investing habits and taking a cue from their practices. After all, America’s privileged have their wealth for a reason… It’s one thing to accumulate wealth, but they’re also incredibly successful at preserving and growing it for years on end. #-ad_banner-#I personally know about the perpetual income of America’s privileged because it’s also been in my family now for three generations. Read More

For the past few months, I’ve been telling readers of my High-Yield Investing newsletter about the secrets of America’s privileged. You see, wealthy folks in the U.S. invest differently than most of us. And I believe it’s worth examining their investing habits and taking a cue from their practices. After all, America’s privileged have their wealth for a reason… It’s one thing to accumulate wealth, but they’re also incredibly successful at preserving and growing it for years on end. #-ad_banner-#I personally know about the perpetual income of America’s privileged because it’s also been in my family now for three generations. Ever since I can remember, money was never a source of worry in our family. I don’t recall hard times while growing up. I know there were recessions… and I had friends whose fathers had been laid off. But somehow, we were isolated from the same hardships. You see, my grandfather came upon the perpetual income of America’s privileged 30 years ago and it has changed the way our family has lived ever since… Now, don’t get me wrong. I’m not claiming I come from a family of America’s privileged. We’re ordinary folks. The kind you meet every day. Both… Read More