It’s a favorite investment among America’s wealthy. It also has nothing to do with stocks or bonds. Nor is it affected by the economy. #-ad_banner-#Once exclusively available to the richest Americans, this effective wealth-generating asset is now available to the rest of us. I’m not talking about hedge funds… accredited investment deals… or private offerings. But about another investment that has been known to shelter wealth more resiliently than any of these… a source of perpetual income that has supported the lavish lifestyles of wealthy Americans through good times and through bad. And it does this by growing faster than… Read More

It’s a favorite investment among America’s wealthy. It also has nothing to do with stocks or bonds. Nor is it affected by the economy. #-ad_banner-#Once exclusively available to the richest Americans, this effective wealth-generating asset is now available to the rest of us. I’m not talking about hedge funds… accredited investment deals… or private offerings. But about another investment that has been known to shelter wealth more resiliently than any of these… a source of perpetual income that has supported the lavish lifestyles of wealthy Americans through good times and through bad. And it does this by growing faster than the rise of inflation… an average 10% a year for the past 60 years. That’s enough to double your income every four years. That means every $1,000 invested in 2005 would have grown to $4,000 by 2013, and would possibly grow to $16,000 by 2021 if this investment continued compounding at its 60-year historical average growth rate. Projected Growth Using This Wealth-Generating Asset If you’ve read my previous essays on this investment before, you know that thanks to a law hidden deep inside the Cigar Excise Tax Extension Act, signed more than 50 years ago… Read More

$1,265,836,000,000. This is the amount of cash that S&P 500 companies (excluding banks and other financial institutions) are currently sitting on. As of the beginning of the third quarter in 2013, the largest U.S. companies collectively held $1.27 trillion. That’s about 13.5% more than a year earlier.  Remember, this is just the 500 members of the S&P. The number also excludes the cash held by the other 9,500 public companies that don’t belong to the index.  As you can see from the chart below, corporate America has never been as flush with cash as it is right now. If you… Read More

$1,265,836,000,000. This is the amount of cash that S&P 500 companies (excluding banks and other financial institutions) are currently sitting on. As of the beginning of the third quarter in 2013, the largest U.S. companies collectively held $1.27 trillion. That’s about 13.5% more than a year earlier.  Remember, this is just the 500 members of the S&P. The number also excludes the cash held by the other 9,500 public companies that don’t belong to the index.  As you can see from the chart below, corporate America has never been as flush with cash as it is right now. If you converted all this money into $100 bills and stacked them up, the pile would stretch 800 miles high. And if it was spent at the rate of $250 million a year, it would take 5,100 years to exhaust the supply.   Where is this cash coming from? Well, borrowing accounts for some of it. But mostly, companies are simply generating cash faster than they are spending it. The widening difference between cash inflows and outflows has allowed businesses to sock away $150 billion over the past twelve months. As a result, cash stockpiles have ballooned from $1.11 trillion… Read More

Recently, I told StreetAuthority readers about two of the most famous land deals in history. And while most history buffs know the story behind the Louisiana Purchase and the cession of Alaska to the United States by Russia, my point in relating those two stories was to illustrate the timeless wealth potential of real estate that still makes for a smart investment to this very day. I recently retold the story of another famous land deal to readers of my premium income newsletter, High-Yield Investing, to further drive home the point. I’d like to share that story with you… Read More

Recently, I told StreetAuthority readers about two of the most famous land deals in history. And while most history buffs know the story behind the Louisiana Purchase and the cession of Alaska to the United States by Russia, my point in relating those two stories was to illustrate the timeless wealth potential of real estate that still makes for a smart investment to this very day. I recently retold the story of another famous land deal to readers of my premium income newsletter, High-Yield Investing, to further drive home the point. I’d like to share that story with you today — and tell you about how regular investors can gain exposure to some of the most valuable real estate in the world without having to risk enormous amounts of capital… #-ad_banner-#Neither of these two famous land purchases I recounted earlier compares with the real estate coup that was orchestrated by a man named Peter Minuit in May 1626. Legend has it that Minuit, a representative of the Dutch West India Co., bartered some goods worth 60 Dutch guilders to local Indians in exchange for what is now the island of Manhattan. Now, this tale is part truth and part… Read More

Businesses are swimming in cash right now. As of the beginning of the third quarter, the 500 largest U.S. companies collectively held $1.27 trillion. That’s about 13.5% more than this time last year. If you converted all this money into $100 bills and stacked them up, the pile would stretch 800 miles high. #-ad_banner-#And if it was spent at the rate of $250 million a year, it would take 5,100 years to exhaust the supply… So where is this cash coming from? And more importantly, how can investors take advantage of this $1.3 trillion problem?  Let me explain… Borrowing accounts… Read More

Businesses are swimming in cash right now. As of the beginning of the third quarter, the 500 largest U.S. companies collectively held $1.27 trillion. That’s about 13.5% more than this time last year. If you converted all this money into $100 bills and stacked them up, the pile would stretch 800 miles high. #-ad_banner-#And if it was spent at the rate of $250 million a year, it would take 5,100 years to exhaust the supply… So where is this cash coming from? And more importantly, how can investors take advantage of this $1.3 trillion problem?  Let me explain… Borrowing accounts for some of the corporate cash hoard. But mostly, it’s that companies are simply generating cash faster than they are spending it, creating healthy amounts of free cash flow (FCF) — a company’s fuel for dividends and growth. I consider free cash flow the best measure of a company’s earnings power. The calculation is simple. You start with operating cash flows and then subtract any capital expenditures made for property, plants and equipment (PPE). The result is the true cash generated by the business after all the regular bills (salary, rent, etc.) have been paid and after any discretionary spending… Read More

The 30-year Treasury 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. #-ad_banner-#Let’s forget for a moment about the Federal Reserve’s intention to taper quantitative easing, which has already begun to place 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… Read More

The 30-year Treasury 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. #-ad_banner-#Let’s forget for a moment about the Federal Reserve’s intention to taper quantitative easing, which has already begun to place 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. 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 lent the government $30,000, enough money to buy three average new cars… Read More

Saddled with a pile of debt and a looming war with England, France was in desperate need of cash in 1803. So Napoleon took the same course of action that many publicly traded companies do today — asset liquidation. The ensuing Louisiana Purchase was sealed for $15 million, or just 3 cents per acre. Thomas Jefferson’s emissaries to France struck an incredible bargain. They acquired a territory that stretched from the Gulf Coast to Canada, essentially doubling the size of the fledgling United States. France didn’t know it, but Jefferson was willing to pay $10 million just for the city… Read More

Saddled with a pile of debt and a looming war with England, France was in desperate need of cash in 1803. So Napoleon took the same course of action that many publicly traded companies do today — asset liquidation. The ensuing Louisiana Purchase was sealed for $15 million, or just 3 cents per acre. Thomas Jefferson’s emissaries to France struck an incredible bargain. They acquired a territory that stretched from the Gulf Coast to Canada, essentially doubling the size of the fledgling United States. France didn’t know it, but Jefferson was willing to pay $10 million just for the city of New Orleans. Control of the strategic port secured navigation and trade along the Mississippi River, which is what he was really after. #-ad_banner-#For half a century, this would be the cheapest and most transformative land grab in the nation’s history. But it was outdone in 1867, when Russia (a motivated seller that also feared war with England at the time) ceded what would later become the state of Alaska for $7.2 million. This purchase netted more than twice the land area of Texas for just 2 cents an acre. That’s an amazing deal — even before you consider the… Read More

I received this message in my inbox recently. It brings up a good point and captures what I imagine a lot of my readers have in their minds… “We own gobs of stocks in High-Yield Investing. Instead of having more and more new additions, would you consider adding to an existing holding?” – Lloyd F. #-ad_banner-#When you cover several exciting new investment ideas month after month, it doesn’t take very long to build a large collection of stocks and bonds. The current High-Yield Investing portfolio is diverse, but manageable. I keep close daily tabs on all of our holdings. Still,… Read More

I received this message in my inbox recently. It brings up a good point and captures what I imagine a lot of my readers have in their minds… “We own gobs of stocks in High-Yield Investing. Instead of having more and more new additions, would you consider adding to an existing holding?” – Lloyd F. #-ad_banner-#When you cover several exciting new investment ideas month after month, it doesn’t take very long to build a large collection of stocks and bonds. The current High-Yield Investing portfolio is diverse, but manageable. I keep close daily tabs on all of our holdings. Still, I wanted to accommodate Lloyd’s request in today’s essay — not because there is a shortage of new candidates, but because this is an opportune time to revisit an old favorite. And it remains a stellar dividend payer to this day…  As they say, sometimes your best new investment idea is a stock you already own. And subscribers who have joined within the past couple of years might be unfamiliar with this particular story. This company’s progress in recent years has been nothing short of amazing. I could tell you all about it, but I’d rather show you. The chart… Read More

For a landlord, there’s absolutely no better tenant than this one. Every year, the 12,000 employees at the U.S. government’s General Services Administration (GSA) are tasked with spending roughly $66 billion dollars on all of the goods and services needed to keep our government running. The biggest expense: real estate. Although Uncle Sam owns nearly 10,000 buildings, he’s also the nation’s largest renter. The government never bounces a rent check, and tends to look for long-term, stable leases. And as it turns out, renting to the government is quite profitable. A top landlord to Uncle Sam throws off sterling cash… Read More

For a landlord, there’s absolutely no better tenant than this one. Every year, the 12,000 employees at the U.S. government’s General Services Administration (GSA) are tasked with spending roughly $66 billion dollars on all of the goods and services needed to keep our government running. The biggest expense: real estate. Although Uncle Sam owns nearly 10,000 buildings, he’s also the nation’s largest renter. The government never bounces a rent check, and tends to look for long-term, stable leases. And as it turns out, renting to the government is quite profitable. A top landlord to Uncle Sam throws off sterling cash flow, which translates into a rock-solid 7% dividend yield for investors. That’s a lot of reward for little risk.  I’m talking about Government Properties Income Trust (NYSE: GOV), a real estate investment trust (REIT) that leases more than 10 million square feet spread across 82 buildings, mostly to the public sector. (Roughly 68% of revenues are derived from the U.S. government, another 20% from state governments, 7% from the private sector, and 5% from the United Nations).  A sample of tenants includes: — The Centers for Disease Control (CDC) in Atlanta — Many of the Federal Bureau of Investigation’s… Read More

Imagine pocketing checks from an investment throwing off 7% interest.  It’s not easy to picture in today’s low-interest environment with saving accounts paying less than 1% and the S&P 500 carrying a dividend yield just under 2%.  Now, imagine pocketing dividends from a company yielding 7% with rock-solid business income all but backed by, and coming directly from, the federal government. #-ad_banner-#Hard to believe, but an investment like this exists. Around the time that I first told High-Yield Investing readers about the company last month, one person was so excited about it, he was inspired to email me this question:  “I… Read More

Imagine pocketing checks from an investment throwing off 7% interest.  It’s not easy to picture in today’s low-interest environment with saving accounts paying less than 1% and the S&P 500 carrying a dividend yield just under 2%.  Now, imagine pocketing dividends from a company yielding 7% with rock-solid business income all but backed by, and coming directly from, the federal government. #-ad_banner-#Hard to believe, but an investment like this exists. Around the time that I first told High-Yield Investing readers about the company last month, one person was so excited about it, he was inspired to email me this question:  “I was recently reading about Government Properties Income Trust (NYSE: GOV). With monthly income plus special tax preference, it seems almost like a no-lose stock. Is it too good to ignore?” — David K. I wouldn’t call it a “no-lose” proposition, but GOV is definitely worthy of consideration.  As the name implies, Government Properties Income Trust owns buildings that are leased to state and federal government agencies. The company owns 82 properties from New York to California that hold more than 10 million square feet of rentable space. Virtually all (94%) of the income generated by these buildings comes from… Read More

Imagine buying a used paperback book for $5, reading the first few chapters, and then finding a $1 bill tucked neatly between two of the pages. Because the book came with a little cash, the net purchase price essentially drops to just $4. That’s essentially what we see with cash-rich companies like GPS-maker Garmin for example. The company holds $13.84 per share in cash with zero debt. So a potential acquirer that bought all the outstanding shares at the recent price of $46.25 would really only end up paying about $32.41. #-ad_banner-#Of course, buying a few shares doesn’t mean you… Read More

Imagine buying a used paperback book for $5, reading the first few chapters, and then finding a $1 bill tucked neatly between two of the pages. Because the book came with a little cash, the net purchase price essentially drops to just $4. That’s essentially what we see with cash-rich companies like GPS-maker Garmin for example. The company holds $13.84 per share in cash with zero debt. So a potential acquirer that bought all the outstanding shares at the recent price of $46.25 would really only end up paying about $32.41. #-ad_banner-#Of course, buying a few shares doesn’t mean you can march in and demand payment. But as a stockholder, you do have a pro-rata claim on that cash. And while you can’t spend it freely like the $1 in the book, it can still be used in numerous ways to enhance shareholder value.  That money can be used to repurchase stock, to make a special dividend distribution, to pay down debt, to upgrade equipment, to fund an acquisition… you name it. Equally important, having access to that much cash negates many of the financial worries that can cripple a stock. Expanding companies need capital, and raising it isn’t always… Read More