In 1935, Grace Groner took a job as a secretary at Abbott Labs.
One of the first things she did was buy $180 worth of the company’s stock. By the time she passed in 2010, her initial $180 position had turned into $7 million.
Anne Scheiber was an IRS auditor… In 23 years, she never received a promotion. But she saved relentlessly.
When she retired in 1943, she invested $5,000 in the stock market. By the time she died in 1995, her initial $5,000 investment increased to $22 million.
Here’s what Grace and Anne had in common: They both bought a certain type of company and never sold their shares.
It’s a simple strategy. But most people don’t have the patience to pull it off.
If you have the perseverance to turn a small position into a multimillion-dollar retirement nest egg like Grace and Anne did, we’ll show you the strategy they used. As well as the types of companies they bought…
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How to Grow Your Retirement Nest Egg
They may not have known it, but the strategy Grace and Anne used is called dividend growth investing.
The strategy is pretty simple. All you have to do is:
- Find companies that sell things people need.
- And choose the best ones that pay dividends.
In Grace’s case, she owned shares in a pharmaceutical company that sold disinfectants and anesthetics that people use every day.
Abbott also paid a dividend. And she used that to buy more shares of the company.
She continued to use her dividends to buy more shares for years… and let the power of compounding grow her wealth exponentially.
The best companies to buy for this strategy are called “dividend aristocrats.”
These are companies that have grown their dividends every year for at least 25 years.
Now, not all dividend-paying companies are the same. So if you want to find the best of the best, here’s what you should look for…
Picking the Perfect Aristocrat
There are four criteria we look for in the best dividend aristocrats:
- It has a product that we can’t live without.
- It has a dividend yield greater than 2%. (This is key to beating inflation.)
- It grows the dividend more than 2% a year.
- It can continue paying its dividend (has a dividend payout ratio of less than 70%).
One example of a dividend aristocrat is American States Water (AWR). It’s been paying a dividend for 62 consecutive years (the longest current streak).
Let’s see whether AWR checks all four boxes above…
AWR is a water utility, and that’s something people can’t live without. Check.
Right now, its dividend yield is 2.2%. Check.
Over the past 10 years, AWR has increased its dividend an average of 6.9% per year. Check.
AWR’s current payout ratio (total dividends divided by profits) is only 55%. That leaves plenty of room for the dividend to grow and for AWR to meet the payments. Check.
Now, share prices of dividend aristocrats like AWR don’t fluctuate much over time. You’re not buying them for appreciation. You’re buying and holding them for their fat payouts.
The goal is to compound those payments over many years by continuing to buy shares.
If preserving your wealth is your main objective, look into dividend aristocrats. You can check out a list here.
If you don’t want to buy individual stocks, consider the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).
NOBL yields 2%… And the payment will grow every year as the aristocrats raise their dividends.
Again, you’re holding these for the long term. Be patient like Grace and Anne… And someday you could wake up a millionaire.
Regards,
Nick Rokke, CFA
Analyst, The Palm Beach Daily
P.S. Buying and holding dividend aristocrats is a tried-and-true method for building your retirement nest egg. The average return is between 10% and 12%. Those are good returns… But you can beat them by being an active investor. We’ve shown you a couple strategies that earn over 20% per year. You can check them out here.
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CHART WATCH
China just became the biggest buyer of U.S. oil…
Plenty of ink has been spilled about how the Chinese are taking American jobs.
But now the Chinese are supporting a very important American industry: oil.
Just last month, China surpassed Canada as the biggest buyer of U.S. crude.
Now that U.S. oil producers can sell cheaper than their Middle Eastern counterparts, China is starting to buy American.
If this trend continues, we’ll be looking very closely for U.S. oil producers to add to our America First Portfolio.
—Nick Rokke
MARKET BRIEFS
What Can $1 Buy Today?: In 1913, $1 could buy a women’s dress. In 1940, $1 could buy 20 bottles of Coke. And in 1990, $1 could buy a gallon of milk. Today, $1 is just enough to buy you one song on iTunes.
On Thursday, we told you how inflation was like a “hidden force” that increases the prices of goods and services. Eventually, this hidden force will erode your wealth. This eye-opening visualization shows just how powerful this slow-moving force can be. If you want to protect your wealth against the tidal force of inflation, we suggest you buy some equities…
Watch Out for This Shady Practice: Not only is inflation eroding your wealth, but it’s also robbing you blind. To avoid raising prices, companies are reducing the size or quantity of what they sell. It’s called “shrinkflation.”
In short, shrinkflation is a way to conceal inflation. And the problem is only going to get worse as inflation marches higher. If you’re looking for another way to protect yourself from inflation, our friends over at Casey Research say you should consider buying some gold…
Doom Index Says Beware: When an investor buys stocks on margin, he borrows the bulk of the purchase price from his broker. When more people buy on margin, it’s a sign that investors are optimistic.
Today’s level of margin debt was last seen near the dot-com peak in 1999. It’s just another sign that the economy is on shaky ground. Because if optimism is at its peak, there’s only one direction it can go from there…
MAILBAG
Editor’s Note: Some bemused feedback from readers about Wednesday’s Market Brief on turning humans into cyborgs…
From Ray A.: Digital money. NSA listening to all our phone calls, texts, emails. And now companies are putting a chip in everybody. All for the benefit of “the people.” Boy, are people stupid!
From Shawn M.: In regards to your “If You Can’t Beat Them, Join Them” brief about implanting microchips in humans… I would recommend you see the documentary by the late producer Aaron Russo, America: Freedom to Fascism. In it, Russo recounts a conversation he had with his friend Nick Rockefeller. He told Russo that one of the main objectives of the global elite is to have everyone “chipped.” That way, elites can have more control over society. Scary stuff if true.
Editor’s Note: And more interest in the Daily Elite 25…
From David B.: I would be interested in seeing the Elite 25 updated monthly. Do you recommend investing equal dollars per recommendation or equal shares?
From Phil S.: If we didn’t buy the Elite 25 from Day 1, how do we start? And what does a hold mean?
Editor’s Reply: We update the Elite 25 every month. Positions marked “hold” indicate there are no changes. Any position in the monthly update is a buy. We put an equal dollar amount into each position.