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