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

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