How “Lifetime Income Growers” Can Pay You More And More Each Year
In a recent article, I told you all about my strategy for maximizing income by investing in stocks that fall in what I call the high-yield “sweet spot”. They aren’t the absolute highest yielding stocks on the market, but this special group of stocks tends to outperform all the rest. In fact, one study even shows they returned an average of 14% per year over the past 86 years.
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 what we do over at High-Yield Investing. So today, I’d like to tell you about another group of income-payers that are a key area of focus — and why they should have a place in any well-balanced income-focused portfolio.
Why You Should Own Lifetime Income Growers
I like to call the second group of stocks “Lifetime 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…
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, Lifetime Income Growers start out with smaller yields, but grow their dividends for years on end, often at a fast clip — sometimes even doubling in just a few years.
In short, this is how a “good” yield can often become an absolutely incredible yield over time.
For example, 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…
We added Magellan Midstream Partners for the High-Yield Investing portfolio all the way back in September 2005. At the time, the stock was trading for just a little less than $17 per share and it had a solid yield of 5.7%.
Not bad. But that’s not the big story here…
You see, since then Magellan has relentlessly increased its quarterly dividend 54 times — for a total increase of 285%.
Its most recent quarterly payment was $1.038. That gives anyone who bought the company back when we did a yield-on-cost of 24% on their original investment ($1.038 x 4 = $4.152; $4.152 / $17 purchase price = 24.4%.)
And since MMP is a Lifetime 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, the price alone has shot up 177%.
Add it all up, and if you simply bought this stock when we added it, your total return would absolutely crush the market.
To be clear, since we have a portfolio to manage, we’ve trimmed around this position over the years. So our total return is a little less than that over at High-Yield Investing — but our total return of “only” 435% still crushes the market.
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 Lifetime 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 113%… 126%… 167%… even 243%.
On average, this current positions in this portion of our portfolio have delivered a total return of 143.1%. And the average holding time is close to six years. If you look up their current yields today, you’ll find an average yield of about 5%. But since we’re in it for the long-haul, our average yield-on-cost is more like 8.6% — for now…
Action To Take
Not only do Lifetime 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 for investors who want a rising stream of income coupled with large gains.
Now, as you might expect, Lifetime Income Growers are pretty rare. In fact, have eight positions in this section right now. 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. 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 High-Yield Investing strategy works in greater detail. And we’ve even included a list of 5 “Bulletproof” income payers to get you started as a special bonus to new members who give our service a try. I encourage every reader who is interested in turbo-charging their income to check it out. Click here to check it out now.