“The secret toll-free phone call that enables you to increase your dividend yield by 10-times or more”

I’ve been getting lots of questions about this secret toll-free phone number this week, so I thought I should try to take a look for you today. Apparently it’s all about some way to boost your dividend by calling a special phone number — which can’t help but conjure up a mental image of vast riches headed your way, even though we all probably know that it’s a ridiculous notion that you could get a bigger dividend just by calling and asking for it.

But as always, there’s a bit of truth to the ad, too — so what are we looking at here? The ad is for Tom Dyson’s 12% Letter, and it’s mostly about the huge dividends that some folks have received by using this special “secret phone number.” Here’s an excerpt with an example:

“But I think there’s one quick 5-minute phone call every person at or near retirement age should consider making right now.

“In short, it’s a secret toll-free number – one 99% of investors know nothing about – that, when you call, actually enables you to increase the dividend yield on stocks you already own (or want to buy) by 1,000% or more…

“New Jersey resident Fred Ruby is the perfect example. A self-proclaimed ‘amateur investor with no particular expertise in the stock market,’ Ruby called the secret phone number after buying one of his favorite companies, Johnson & Johnson.

“Now, while most shareholders take home the company’s “standard” 3.4% dividend, Ruby collects a whopping 63% yield on his initial stake!”

Why haven’t you heard of this? Dyson has an answer for that, too:

“… if calling this secret phone number is so lucrative, how come EVERYONE doesn’t know about it?

“Well, the answer is, even though the service provided through this phone number is perfectly legitimate (and supported by more than 650 U.S. corporations), SEC rules DO NOT allow these corporations to advertise the number to the public (I’ll explain why in a minute). So most folks have no clue it even exists.”

And a bit more:

“The folks I’ve been describing in this letter have been able to turn ordinary miniscule dividend yields into 20%… 30%… even 40% or more, simply by taking advantage of what was once an obscure corporate perk…

“Don’t worry, you don’t have to use options or sell covered calls… or anything tricky or speculative like that. It simply takes one small but radical change in the way most people buy ordinary stocks. It’s a little-known perk Fortune 500 employees have been taking advantage of for decades.

“I call this secret benefit the ‘424 Dividend Boost’ because for years it enabled employees to make a full 1,000% – 2,000% MORE than normal on their shares of company stock.”

Ah, so I should have read through the whole thing before starting to write to you today! Those of you who’ve been castaways on Gumshoe Island for any length of time have probably heard of this “424 Dividend Boost” before, it’s a term that Dyson has used in his ads for a couple years, seemingly replacing his previous made-up term for the same strategy, the “801k plan.”

So yes, we’ll look into those “secret” phone numbers in a moment, but the basic strategy that’s being used here is … wait for it … Dividend Reinvestment! Wow!

And more specifically, though I’m sure Dyson also would probably suggest that reinvesting dividends through a discount brokerage account works just fine, the tease is for direct stock purchase and dividend reinvestment plans that you can enroll in through the companies themselves.

And yes, you can really turn that 3.4% yield on JNJ shares into a 63% yield, but the key qualifier is that on the original stake bit… and we’ll throw in a second qualifier, that you have to be willing to wait a few years, or a few decades.

The math is fairly simple — if you bought shares in JNJ 15 years ago you probably would have paid about $20 a share, split adjusted. The annual dividend was about 38 cents per share at the time, so that was a fairly paltry dividend of just under 2%.

But JNJ has raised the dividend each year … and the magic of compound dividends does it’s little zappity-doo-dah on those shares, too, so the yield on your JNJ stake now — relative to your original investment — would be truly massive.

Even if you don’t reinvest the dividends, the effectiv