Wednesday, February 6, 2013

The Greatest Dividend Payments You've Never Heard Of

As we have discussed in the past, dividends will grow in importance as people seek certainty of yield. Aivars Lode
The world is catching on to Dan Ferris' "World Dominating Dividend Grower" idea…

Over the past few years, most "World Dominator" companies have soared in price. For instance, both Procter & Gamble (PG) and Wal-Mart (WMT) are up about 20% in the past year. Also, we've noticed that a few publishers have "borrowed" Dan's term for their own commentary and marketing.

There's good reason why his idea is catching on. Buying elite businesses at a good price – and then compounding wealth with them for many years – is a safe, steady way to get rich in stocks.

But if investors focus solely on the world's biggest companies, they miss out on large group of stocks that can help them grow wealthy.

World Dominators – elite, large-cap dividend-payers like Coke – can be fantastic stocks to own. They are legendarily profitable businesses with world-famous brand names. When professional investors gather to discuss great businesses, these names always come up. Everyone knows they are great businesses.

This often presents a problem with the biggest blue-chip names. When everyone wants to buy something, it almost always commands a premium price. An investor can end up waiting a long time to get a chance to buy these premium businesses for bargain prices.

That's why I encourage investors to learn about the class of elite, small-cap dividend-payers that also have great brand names… that also havecompetitive moats… that also have stable cash flows… and that also have long histories of uninterrupted dividend growth.

They just happen to be much smaller than giants like Coke (KO) and McDonald's (MCD). Some aren't even 1/100th of the size of Coke. And while some of these elite firms provide brand-name products and services you might use every month, most people have never heard of them. Their small size makes them fly under the radar of many institutional investors. Many pension funds, mutual funds, and hedge funds are just too big to buy these small-cap dividend-payers.

Thus, investors who know about these stocks face a lot less "buying competition" when they're looking to pick up shares at a good price.

For example, there is a list of over 100 small-cap, dividend-paying stocks that Wall Street has largely ignored. These small caps have a lot in common with companies like Coke and McDonald's.

They are safe companies. All the names on this list have been raising their dividends annually for more than 10 years. Most have been around for more than 25 years.

Like many large-cap, dividend-paying stocks, these companies generate tons of cash flow. They have competitive advantages in their respective industries. They also have solid management teams.

Take Leggett & Platt (LEG), for example. Without this company, everyone would have severe back problems. That's because they invented bedsprings more than 125 years ago.

Today, LEG employs over 18,000 people who work in 18 countries. The company is one of the largest manufacturers of mattress bedsprings, bed frames, and pocketed coils in the world. It also produces tons of steel each year, used to make specialty wire found in chairs, racks (you can find in almost every retail store), and fitting rooms.

Turning to the financials, LEG trades at 14 times earnings, a big discount to most dividend-paying stocks. LEG is also expected to grow its earnings by 12% annually over the next two years. That's more than 50% faster than the average S&P 500 company. LEG pays a 4% dividend. That's almost double the rate of the average S&P 500 company. It's also been raising its annual dividend for 40 years. That's longer than Pepsi, McDonald's, and AT&T.

LEG is just one example of the many excellent small-cap dividend-payers out there you can confidently hold a long-term position in.

Keep in mind: These stocks aren't going to soar 100% overnight… but they can form the "core" of a safe retirement account. They'll allow you to put the power of compounding to work for you, while still giving you plenty of upside. And because of their small size, we have less "buying competition," which means we can often buy them for bargain prices.

Don't miss out on the best dividend payments you've never heard of…


Frank Curzio 

No comments:

Post a Comment