Of the many things that investors lust after, foremost are the idea of being in a “secret” deal that not everyone else knows about, and receiving high cash dividends from their investments.
Which is understandable — it’s fun to be “in the know,” and historical stock market returns show the importance of dividends. By many measures and for long time periods, half or more of the return of stocks for long-term shareholders comes from dividends (and, critically, the reinvestment and compounding of those dividends).
But if you add in the fact that investors are absolutely starved for income in many traditional “safe” investments like CDs or bonds, or even blue chip or utility-type dividend stocks, you can see why ads promoting 11% yields and “secret” dividends get the attention of readers. And have the capacity to mislead.
That brings us to the teaser of the day: Nathan Slaughter is pitching his High-Yield Investing by telling us that he has stocks with “hidden” dividends that the media doesn’t know about, and that fly under the radar of individual investors — so much so that he says you can get 11% yields from stocks that other people think have a much lower dividend.
And he’s not using options income as a way to boost dividend income, as many teasers do — we see lots and lots of options advisories now, almost all of which are touting income strategies for options (that means either selling puts on stocks you don’t own, or selling covered calls on stocks you do own, or both). From the rest of his letter it sounds like this may be a strategy they employ at High-Yield Investing, too (which probably doesn’t work very well — most options are very illiquid, so basic options strategies tend to have disappointing results once you have more than a few dozen people who try to enter the trade on any given day, unless you’re dealing with just mega-caps or ETFs that have relatively high option volume, and this newsletter is only $39 a year so probably has thousands of subscribers)… but this particular tease is all about stocks that have a “real” cash yield for regular shareholders.
So who are these “secret” stocks? He goes through a littany of “secret” examples, stocks that are listed in Yahoo Finance or Marketwatch with a yield of one or two or three percent, but that have actual trailing cash dividends several times that high… so we’ll figure out which are his favorites and let you know. If you want to subscribe to his newsletter after that, be my guess — but don’t ever subscribe to a newsletter just to learn about a “secret” like this, that starts you out with a confirmation bias (you bought it, so it must be a good idea! Buy whatever the “secret” is right away!) and we get enough bias in our investing world without voluntarily adding another layer.
Let’s get a taste of the tease here to put you in the mood:
“These Companies Dish Out Big Bonus Dividends Every Year
“You see, most companies pay out four dividends per year. But these companies – the Hidden High-Yielders – are different.
“In addition to the usual four, they pay out extra dividends too.
“They’re paying one, two, three, even four extra dividend payments every year. And many of them have been dishing out an extra payout every year for several years now.
“In other words, for most of them it’s a formalized practice… an established pattern.
“But since these extra dividends technically aren’t ‘regular’ payments, they go completely under the radar. The financial media doesn’t know what to do with them, so they don’t count them as part of their yield.”
These kinds of “hidden” dividends have been promoted by newsletter pundits in the past, of course — selling secrets has always worked well as a marketing ploy. Probably the most promoted of these past pitches has been Ian Wyatt’s pitch about the secret oil company with the dividend that’s 10X higher than most investors think (that one was for Diamond Offshore (DO), the drilling rig owner, not such a popular idea more recently, and in February they canceled the large special dividend they had paid for nine years running… an apt reminder that dividends, whether “special” or “regular”, are not guaranteed).
So… which stocks does Slaughter like for their “hidden dividends” these days?
He starts off with a “freebie” …
“Hidden High-Yielder #1 — This Company Has Paid Out Hidden Dividends Worth $3.64 Per Share
“At first blush, it looks like your average company. It’s rarely mentioned on CNBC, and it appears to only yield about 1.5%.
“However, pull back the curtain and you’ll find one of the most relentless dividend payers on the market….
“It’s delivered profits for 16 straight years, and paid a dividend for 38 years. It also has a good track record of hiking those dividends. In the past five years, it increased its dividend 38%…..
“So if you’re looking for a growing company, a rock-solid dividend, and the chance at a massive extra dividend payment, I think this company – RLI Corp. (NYSE: RLI) – is your best option.
“Judging by how few shares change hands each day–138,000, which is about 2% of Wal-Mart’s daily volume – almost nobody knows about this stock. Even fewer know about its juicy 7.6% yield.”Are you getting our free Daily Update
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OK. RLI Corp (RLI), that’s one. It’s a very good small, profitable specialty insurer, and it has indeed paid a large special dividend every year for four years in a row now — that extra payout has come in December, so you’ve