“Bulletproof Paychecks: Income for Life?”

Mitchell Clark's dividend stocks revealed

By Travis Johnson, Stock Gumshoe, April 12, 2010

I got a lot of questions over the weekend about this latest ad for the Income for Life newsletter from Lombardi Publishing — and the digging I did made me want to call some attention to this teaser as a bit of a cautionary tale …

Mitchell Clark, who feels the need to add “b. comm” after his name to boast that he has an undergraduate business degree, edits this letter and promises in the ad that his favorite stock could “pop to $68 from $28” — and that it will provide you with great, steady income along the way.

The rest of the ad is just a thinly-veiled tease for dividends in general — we see dividends called lots of things, from “plan b pensions” to “monthly paychecks” to “801k plans” in teasers, so seeing them called “bulletproof paychecks” is not terribly shocking.

And it’s not hard to “get your name on the list” for these exclusive “investor paybacks,” of course, all you have to do is buy the stock and you’ll get the dividends.

Most income newsletters have some variation of this tease, and the rush to get in is generally built around the ex-dividend date — as in “you must get in now or you’ll miss this paycheck.” Here’s how the Lombardi folks push this one:

“Your first Bulletproof Paycheck will be mailed to you on May 26, 2010… which means you should click the link below ASAP….

“Sorry for the urgency, but there’s good reason. A big lump of money is at stake.

“For some, it could be $1,400. For others it could be $28,455… or $87,822. For you, it could be enough to double or triple your investment income.

“The money (hundreds of millions of dollars) must be sent! By law!”

And then they overstate the safety of the dividend, as do many folks:

“…you get a never-ending stream of ‘investor paybacks,’ guaranteed money, like clockwork — just for getting your name on the list”

A dividend, of course, is only guaranteed to the extent that the company makes a profit and decides to send you money. Many companies have strong dividend policies, and most companies, at least in North America, are loath to cut their dividend, but that is a long way away from a “guarantee” — if you want a guarantee that a company will pay you a particular amount of money, you’ll have to lend them money (ie, buy a corporate bond), not just buy a piece of the company… and even then, the guarantee still depends on the company’s solvency. Or deposit money in their bank, if you’re happy with a .01% return on your savings account.

So that’s my quick bloviation about dividends and all of these promises about “guaranteed income” — don’t get me wrong, I’m all for dividends, and dividend growth companies have historically been among the most powerful long-term investments in the world.

But that doesn’t mean this ad smells any better — because although they’re sending it out now (the ad went out at least as recently as Saturday to many of my readers) with promises of a great Canadian bank that they’ve identified for you, the teased stock is getting the aroma of last year’s fish.

Here’s how they tease this particular stock:

“Looks like a loser, until you look closer

“I’m telling Income for Life members to buy a stock that looks bad at first glance, on two levels.
1) The stock was battered last year; and
2) It’s a bank.

“Most investors will look at those two points, then quickly turn and run away. They’re wrong!

“Sure, the banking industry is still a mess. But look closer and you see my pick is a Canadian bank. Subprime mortgages? Not in Canada. Toxic assets? Not on the books.”

Which is all well and good — lots of folks have been urging you to invest in Canadian banks as they’ve suffered alo