“U.S. 801K Plans — double the returns from 401Ks!”

There’s a new teaser going around from a Stansberry newsletter, this time it’s from the 12% Letter by Tom Dyson, and it’s teasing us about a secret retirement plan they call the 801K. They’ve got a special report to send you called How to build a $1,000,000 Retirement with “U.S. 801(k) Plans” … and all you need to do to find out what these 801K plans are is to try a subscription for $99.

So there are two parts to this tease, the way I see it — there’s the actual “801K” concept, and then there are eight individual companies that provide these plans, which Dyson thinks are the best ones to buy.

First, the idea of the 801K:

“These companies encouraged the direct investment by paying out unusually high dividends and designed programs that automatically reinvested the profits. This ensured that ordinary Americans like you and me could start out small, with as little as $25, and quickly accumulate thousands of dollars in savings, without ever investing another penny.”

“But don’t ask your broker or financial advisor about “U.S. 801(k) Plans.” They will try to push you instead into a mutual fund that returns, at best, 10% a year. Remember, brokers can’t collect big fees and commissions with “U.S. 801(k) Plans” because you buy shares directly from the company.”

“Perhaps this is why the government restricts the advertisements of these opportunities. If they didn’t, some brokers might actually go out of business! Like I said, you’re not likely to hear about “U.S. 801(k) Plans” any place else.”

So, you may have figured this out on your own, but 801K plans are simply Dividend Reinvestment Programs (DRIPs). This is a program whereby companies — usually big, stable ones — sell stock directly to shareholders with an agreement for a regular ongoing investment and the reinvestment of all dividends. You invest a set amount, usually every month, not unlike with a mutual fund investment program, and the share price doesn’t matter because they’ll issue partial shares.

Some companies charge a fee for this, some do not, and some even offer a discount for purchase via reinvested dividends … but it is indeed a direct relationship with the company that doesn’t involve a traditional stockbroker. Services like Sharebuilder.com also do this, so you can initiated a DRIP plan even for companies that don’t offer them directly, but they charge either a small commission or a monthly fee.

There is plenty of good basic info on DRIPs out there — including from the Moneypaper, the Motley Fool and others. Most companies require you to be an owner of at least one share listed in your name already, some don’t or will help you to get that share, or there are some “single share” services that will help you to easily buy and get a certificate for a single share. This “single share” business is probably the biggest impediment to DRIP adoption, aside from the fact that you have to have separate plans set up with each company unless you want to join a club or pay for a service that does it for you (and really, it looks like fees for that negate much of the advantage of the DRIP for many stocks).

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But several “801K” companies were teased in this email, too — what are they? More than half of the S&P 500 offer these plans, as do many other companies, so I’m not certain that the clues given here will be enough to smoke out the company names … but we’ll try. Here’s what I know about the first two, I’ll try to get to the other six shortly:

“U.S. 801(k) Plan” Company #1 – This company is a fast-growing restaurant chain. It’s been in business for more than 30 years and operates in more than 20 different countries (and counting). In fact, it’s raised dividends every year but one since 1976, which are rising at more than 30% per year – almost twice as fast as the stock price.”

I thought this might be Wendy’s (WEN), but it hasn’t quite raised dividends every year. The 20+ countries, “more than 30 years” history and the DRIP plan and the rate of increase in share price could, arguably, fit.

Brinker (EAT) also fits in some areas — they’re in about 23 countries, but haven’t payed a consistent or rising dividend. Most of the other big restaurant chains are either way too big (even Burger King is in 65+ countries), completely North America-based (only a couple foreign locations), or don’t pay dividends, or, and this cuts most of them out, haven’t been around for 30 years.

But, strange as it seems, I’m pretty certain that this one is actually McDonald’s (MCD)

I know Tom Dyson likes McDonald’s as an income play — he previously teased the stock as The World’s #1 Dividend Machine — so I imagine he was being sneaky, it could well be that McDonald’s actually operates restaurants in more than 20 countries, since most of their restaurants (70%+ internationally) are actually franchisor-operated. The other stuff — company history, dividend history, all matches well. It was at the nadir for this company, in 2002, that they cut their dividend for the first time since 1976, and it has since grown significantly, including a $1 dividend back in November. The DRIP info for McDonald’s is here.

“U.S. 801(k) Plan” Company#2 – This New Mexico-based banking company holds $42.5 billion in high quality assets and has delivered consistent dividend income every year for the past 14 years. It currently pays a 10.10% dividend.”

This one is definitely Thornburg Mortgage (TMA) — DRIP plan info here.

Thornburg is a mortgage REIT that specializes in Jumbo adjustable rate mortgages — the theory is that because they’re dealing with big mortgages, the rich people that owe them money are less likely to default than are subprime borrowers. I don’t know whether or not that’s true, but pretty much all the mortgage-related companies are being tarred by the same brush right now, so if you think TMA stands out as better than its compatriots now might be a fine time to look into it.

One nice thing about TMA is that, because they focus on adjustable rate mortgages, they should theoretically be less susceptible to interest rate risk — assuming, of course, that their spread doesn’t go negative, which is always possible in a world where the yield curve can invert (they borrow money, then lend it in the form of mortgages, and they need their ARMs to pay off more than they have to spend to continue borrowing the money).

So … those are the first two candidates for your 801K plan in case you’re interested in DRIP investing. I’ll try to cover the other six as soon as I can … or you can beat me to the punch and tell us all the sleuthed solutions to these over in the Gumshoe Forum.

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This writeup is a bit old, you can find an updated look at the 801k ads here.

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ShowHide Comments (60)
    1. Bridgett
      Jul 3 2012, 10:42:27 pm

      I use the site listed in the article, Sharebuilder.com and I’ve apparently had several 801k plans over the years 🙂 Sharebuilder does charge a fee, but it’s the commission on the purchase of the stock, not on the reinvestment. Reinvesting dividends and capital gains is free, and its automatically done, unless you change the setting. Also, the monthly charge has nothing to do with reinvesting; it is for better reports, and lower commission fees. I’ve been using them since around 2005. I briefly switched to Sogotrade because their commission is cheaper, but they don’t automatically reinvest and unlike Sharebuilder, you can’t purchase fractional shares.

    2. Kimbieson
      Sep 17 2013, 06:02:46 pm

      Sharebuilder.com is great! up to 12 purchases a month (once or twice per) on the auto plan and $1 for each additional… (direct market trades are $6.95) for a $12 all inclusive fee… I’ve been using them since ’04… have separate accounts set up for the kids for college.
      Now there’s a new player I found – LOYAL3.com
      Big Brand Loyalty is the focus. Walmart, Apple, Starbucks, Coke, Pepsi, McDs, BKs, Berkshire, Disney, Amazon, EA, Google, Intel…. just to name a few… and these Companies pay ALL the fees!
      It’s a one stop DRIP shop! With just $10 to start… you can even do IPOs with a min balance of $350. And new companies are joining all the time. Full service brokers must be thrilled.

    3. valleyh
      Oct 30 2013, 04:34:53 pm

      I have been a member of the Stansburry and Associates for 8-9 month snow…I am intrigued and always try to read their newsletters but cannot wrap my head around it all yet. I think I need to be lead in a major way. Sometimes when I’ve read about the 770 accounts and now the 801k plan, I want to dive right in but am afraid. Can someone please tell me if I need to subscribe to get all the info on how to get started on a 801k plan. I don’t have a 401k or anything, just money sitting in the bank making peanuts!! The subscription is now 39$ btw, BUT WILL IT HELP ME?

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