Money
Get Aboard the
dend-paying stocks. Here’s why:
Dividend investing is highly tax-
effi cient: Income from dividends and
Dividend Machine
long-term capital gains are taxed at a
much lower rate than interest income,
which gives investors who hold shares
It’ll run smoothly and pay you back time
for a long time an interest-free loan
from the government.
and again if you select shares carefully. Dividend investing creates cash
fl ow: Invest in solid companies, and
your dividends will continue arriving
By Julie Crawshaw Why consumer goods companies? every quarter even when the market
“People buy necessities no matter falls, providing a strong steady cash
W
ANT TO PROTECT YOUR PORT- what’s happening in the economy,” fl ow that should outpace infl ation.
folio against market drops, Spetrino says, adding that Jeremy An example: Warren Buffett bought
develop an income stream Siegel’s study of the best dividend Coca-Cola in 1990, and the dividend
to pay your post-retirement living reinvesting investments since 1957 yield increased from 3 percent then
expenses and get a long-term, inter- identifi ed the top 18 of 20 stocks in the to 32 percent now on the shares he
est-free loan from the federal govern- S&P as consumer goods
ment all at the same time? or Big Pharma.
Become a dividend investor, “Analyze companies
advises fi nancial expert Bill Spetrino, carefully,” Spetrino says.
author of The Dividend Machine, a “If you come up with
monthly Newsmax newsletter. even one reason not to
Spetrino points to his own expe- buy a stock, then don’t
rience to underscore his advice: In buy it. Think buy and
2008, an IRA to which he had added hold, and choose your
no new money, except for reinvested stocks as carefully as you
dividends, for more than 15 years paid choose your friends.”
him dividends equal to more than 56 Though Spetrino rou-
percent of his original investment. tinely monitors a uni-
Most people buy stocks hoping verse of 175 to 250 stocks,
they’ll go up in value, which sounds he considers a portfolio
good in theory but rarely proves true of three to 10 stocks ideal:
in practice, Spetrino says. But “Now that valuations
putting money into stocks have come down, there
that pay dividends lets are a lot more bargains
investors grow their nest from which investors can choose.” bought. The stock also has appreci-
eggs while keeping the Spetrino likes companies that ated 10 times since then.
geese that lay them alive. offer high returns on equity and have Dividend investing can preserve
You need acquire only strong, free cash fl ow and a wide mar- capital: Keep reinvesting dividends
a handful of high-quality gin of control over their own destinies. while you’re working, and you can
shares in the right sectors He does not buy shares on foreign continue holding your investments
Bill Spetrino
to build a smooth-running stock exchanges, preferring instead to in retirement as well as pass them on
dividend machine, says Spetrino, select U.S. companies with a strong to your heirs instead of having to sell
whose investment picks have aver- presence in the global economy. them in order to live.
aged returns of more than 18 percent “Investing in large-cap multination- Spetrino says, “Just keep building
compounded annually. als is a better hedge against infl ation your dividend machine and feel sorry
“Make fewer, concentrated bets,” than gold,” he says. “If the dollar gets for those stuck in money markets.”
M
O
he says. “And avoid all banks, start- weaker, corporate income from sales
T
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ups, and capital-intensive businesses. U.S. companies make overseas rises.”
Want to learn more about Bill
/
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PA
Choose consumer goods categories Here are Spetrino’s top three rea-
Spetrino’s Dividend Machine?
N
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O
instead, and try to buy near their sons he believes that everyone should
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Visit us on the Web at:
S
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52-week lows.” build a portfolio of well-chosen, divi-
www.newsmax.com/dividend I
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90 NEWSMAX MAXLIFE / NOVEMBER 2009
90_MONEY_Dividends.indd 90 9/30/09 6:51 PM
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