“Drive-Thru Retirement Project: Monthly Dividends” Solved

By Travis Johnson, Stock Gumshoe, April 3, 2008

Whatever they’re paying the copywriters at Stansberry & Associates, it’s not enough. This stuff is pure gold! Drive-Thru Retirement … now that’s a good idea. I’ll take the Super Size Value Combo, please!

The latest ad from S&A is for a new service they’re providing, a monthly dividend tracking system of some kind, which essentially looks like a special report that you buy for $250, then periodic updates to their list of the best companies to buy, all of whom apparently pay monthly dividends.

The idea of getting a monthly dividend, instead of the more typical quarterly (or, for foreign firms, semiannual) dividends, clearly holds a lot of appeal for people. I don’t know if it’s just the satisfaction of getting that dividend check every month, or the convenience for people who actually live off their dividends, or if it’s the fact that these companies tend to be very dividend-focused, which is also usually an indication of shareholder-friendliness. Of course, the actual yield you get as a dividend is the really important thing, whether it’s annual, quarterly, or monthly, is what should be of preeminent importance — but there’s no denying the fact that lots of investors love monthly payments.

So essentially what’s being teased here is a service that will help you find the best companies that make monthly dividend payments, in order to help you build a portfolio of these high dividend companies. That’s obviously not for everyone, but clearly dividend payers (though not necessarily high yielding dividend payers) should be a significant portion of most peoples’ portfolios — if we’ve learned anything from the gyrations of the market, it should be that there is nothing new under the sun … and for the last century, a huge portion of the overall returns from the stock market have been thanks to dividends.

But the prominent tease is of one particular investment — the “Drive Thru Retirement Project” of John and Helen Scott. Here’s the story in a nutshell:

“In short, John and Helen Scott figured out a financial secret of the fast-food industry, which pays an absolute fortune over the long run. They started nearly 40 years ago, with a local Southern California restaurant you’ve almost certainly heard of: Taco Bell.

“Essentially, the deal went like this…

“Back then, Taco Bell was a young business. They were doing well, and wanted to build more stores. To expand, they needed cash.

“So the Scotts offered a simple proposition: In exchange for ownership of the Taco Bell building, the Scotts gave the Taco Bell owners the cash they needed.

“As part of the deal, the Taco Bell owners agreed to lease the building back from the Scotts for a period of 15+ years. And… get this… the Taco Bell owners agreed to pay for EVERY SINGLE BUILDING EXPENSE: maintenance… taxes… insurance… upkeep… plumbing… everything from changing a light bulb to repaving the parking lot.”

That’s just a net lease arrangement, which is not that unusual — and I don’t expect that the Scotts, whoever they are, invented it. But it certainly holds appeal for landlords, for obvious reasons. Not doing much management work on the building means you lose some opportunity to increase your profits, but it also means you have almost no expenses and the people who really care about how the building looks and works — the folks who are using it — are responsible for that upkeep. This kind of sale/leaseback arrangement is not that unusual today, it’s used across industries for all kinds of expensive capital goods and property, anything that companies need but that would prefer not to carry on their balance sheets.

The lessor, of course, gets a pretty good deal, too — if it’s a growing company, or a company that wants to grow, they get to sell their building but keep long term access to it, and they can use the money they got in the sale to expand elsewhere.

So … they focus on retail establishments, not just fast food joints but all kinds of “life maintenance” retail — grocery stores, pharmacies, etc. The company’s idea is that this keeps things simple and reduces risk, since there is always local demand for local services like food, medicine, and the other necessities of daily life.

The firm has delivered 453 consecutive monthly dividend payments, which, for the arithmetically challenged, is almost 38 years (just