March 27th, 2014
There’s glamour in making money that others don’t know about.
Isn’t there?
But don’t worry. Whatever I tell you here is strictly within the legal boundaries of your country.
Don’t take my word for it. The guy who claimed “I have ways of making money that you know nothing of” is the richest man in human history.
In today’s dollar terms, this guy is worth more than 700 Billion Dollars. Almost 12 times the richest man today.
I have ways of making money that you know nothing of
Who better to have said this than American business tycoon John D. Rockefeller, founder of American Oil Behemoth: Standard Oil.
And just to convince you that Rockefeller knew what he was talking about, Standard Oil was the largest oil company that ever existed. It controlled more than 95% of the American oil industry at its peak. Then due to court rulings against business monopolies, Standard Oil was broken up into seven smaller companies. And one of the seven “smaller” companies went on to become Exxon Mobil (XOM).
Oh, if you didn’t know, Exxon is the largest enterprise in the world today.
Don’t forget to toss in the other “small” one called Chevron too.
But what on earth was Rockefeller talking about?
According to official records and his business sense, Rockefeller was referring to dividends.
In 1896, he gave up control of day-to-day operations but held on to his shares of Standard Oil and the dividends. Since he was the majority owner, he ensured that the company paid out more than 2/3 of its profits as dividends.
For the next forty years until his death, he kept collecting dividend checks and enjoyed the steady capital appreciation of the stock.
He once remarked:
Do you know the only thing that gives me pleasure?
It’s to see my dividends coming in.
That’s right. Rockefeller was a dividend investor.
So how can you use Mr Rockefeller’s secret to become extremely rich?
Tip #1: Guard yourself against people’s opinion about dividend investing.
Almost everyone in the stock market is programmed to make quick money. Very few have the patience to follow the correct process that ensures riches in the stock market.
Believe me, even though waiting around and collecting dividends sounds simple, I bet you it isn’t easy to follow.
Tip #2: Reliable dividends come from companies with predictable revenue streams
Here’s a famous and technically reliable strategy of making money in stock markets with dividend paying stocks - The Dogs of the Dow Strategy.
The strategy is simple.
On the first day of the year, select 10 stocks with the highest dividend yields from the Dow Jones Industrial Average (DJIA). The Dow Jones is made up of 30 stocks.
The table below shows the top 10 stocks (by current dividend yield) from Dogs of the Dow list. You can get the latest list from here.
Rank | Company Name(Part of Dogs of Dow) | Current Dividend Yield (%) |
1 | AT&T | 5.23% |
2 | Verizon | 4.31% |
3 | Merck | 3.52% |
4 | Intel | 3.47% |
5 | Pfizer | 3.40% |
6 | McDonald’s | 3.34% |
7 | Chevron | 3.20% |
8 | General Electric | 3.14% |
9 | Cisco Systems | 3.03% |
10 | Microsoft | 2.99% |
This strategy has beaten the index over the long run with low risk and you can sleep soundly at night.
Here’s another way of profiting off dividends.
This strategy is a combination of Warren Buffett’s policy of “being greedy when others are fearful” and the Dogs of the Dow Theory. To carry out this strategy and meet high returns, follow these steps.
(This step is painful because it could be years before the market crashes. Your money could be stuck in a low interest yielding account. But don’t worry. You will win in step 4 below.)
4. When the markets crash and you are convinced that valuations are low (using indicators like Shiller P/E, P/BV etc), load up the truck on the candidates from step 2
By following this strategy, you pick up great companies at dirt cheap prices. These companies have strong balance sheets to survive the downturn and will reap the benefits of in the next economic up cycle.
Even in a horrible market, people all over the world will continue to line up to buy McDonald’s burgers and fries.
The best part happens when the economy begins to turn around for the good.
The companies you chose may have stopped their dividends during difficult periods, but when the economy gets better, the dividends will come back or increase.
Ultimately, your dividend yield-on cost becomes very attractive because you bought the stocks at such a cheap price.
Take a look at this example. It’d help you better understand this wealth generation secret.
Let’s say you found Intel Corp (INTC) from steps 1 and 2 mentioned above.
Now if you were regularly saving money until 2008 to buy high quality and yielding dividend stocks, 2008 was a great time to buy Intel.
At the end of 2008, the stock price was close to $13.
You feel that it’s a good time to invest as the market is severely undervaluing its long term potential. Also the stock price is down 60% from the highs of 2008.
If you bought Intel at $13, over the next one year (2009), Intel paid $0.56 in dividends. This amounts to a yield of 4.3% on the stock.
Not bad. Isn’t it?
Fast Forward to 2013. The share price hits a high of $26 which is double the buy price.
More importantly, Intel increased its quarterly dividend and paid out $0.92 per share in 2013. That’s a yield of 3.5% based on the $26 price.
But based on the purchase price of $13, the yield is 7.1%.
And that is one hellava yield on a stock that has doubled in price.
Isn’t this great? Of course it is.
Rockefeller understood the power of dividends and for such a savvy businessman, he was delighted in holding his shares.
Take this time-tested secret from a billionaire and use it to work wonders for your long term wealth creation.
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Dear jaafar daud, the lesson from the article is power of dividends. Not comparing who is richer. No offense, please.
2014-03-28 23:32
A good book to read "DIVIDENDS DON'T LIE, by Bill Wermine & Martin Wong... finding value in Bursa Malaysia Blue Chip Stocks.. Ang Kok Heng commented "Stocks paying higher dividends are better managed, at least from a capital management point of view. The gains from dividend yields are like birds in the hand. They are more definite than the uncertainty in capital gains from stock prices"
2014-03-29 01:15
Does anyone have the latest list of top 10 dividend yield counters on KLSE? Of my counters, the one offering the highest dividend is Liihen at 8.4% dividend yield at current price.
2014-03-29 18:13
sense maker, go to this link and screen for it. Sometimes not that accurate cause its based on TTM...
http://www.klsescreener.com/v2/
2014-03-29 19:07
sense maker, go to this link and screen for it. Sometimes not that accurate cause its based on TTM...
http://www.klsescreener.com/v2/
what is TTM?????
2014-07-13 19:56
http://www.klsescreener.com/v2/
so which indicator for dividend is it DY or something else,,just to confirm
2014-07-13 20:02
Posted by sense maker > Mar 29, 2014 06:13 PM | Report Abuse
Does anyone have the latest list of top 10 dividend yield counters on KLSE? Of my counters, the one offering the highest dividend is Liihen at 8.4% dividend yield at current price.
which screener you are using????
2014-07-13 20:03
jaafar daud
Rothchild was much richer than Rockerfeller. He financed Rockerfeller business.
2014-03-27 22:11