This teaser solution was originally published in a Friday File for the Irregulars on November 30. The same ad is still circulating and several new folks have asked about it, so I’m releasing it for all to read today.
What follows has not been updated since the end of November, and the ad is also unchanged, but I’ve added a brief note about the three stocks to the bottom by way of a minor update. Enjoy!
Marc Lichtenfeld is pitching his Oxford Income Letter ($79/yr) with an ad about “Extreme Dividends” — and with everyone feeling a little shaky after a couple tumultuous months in the market, dividends and “money in your hand” offer some solace, so maybe some of his ideas will strike your fancy.
The basic spiel is wildly exaggerated, like many income investment newsletters — he talks up the idea of investing in the stock and “soon” having your investment repaid by huge dividends, getting to the point where your quarterly dividend is as large as the amount you originally invested (“EXTREME DIVIDENDS! The Only Way to Earn More Than 100% Income on Your Money Every Year… for Life…”)
That kind of recurring gain is possible, of course, if you find a company that’s on a strong “dividend growth trajectory” and has staying power, particularly if you find it when it’s not yet beloved (or even trusted), but it typically takes good stock selection and lots of patience — usually for decades.
And “possible” is not anywhere near the same as “likely” — there’s a reason why the folks who squirreled away a little bit of a dividend-paying stock, let the dividends compound, and waited 30 or 50 years to become multimillionaires are great stories, it’s because that doesn’t usually happen. Compounding dividends and long-term patience have indeed built some fortunes, but they don’t usually do so on the back of just a single purchase at just the right time — they do so on the back of continuing, disciplined regular investment in strong and steady stocks that most of us would typically think of as “blue chips,” at least in retrospect.
Here’s a bit of the hype that gets your attention:
“I’m going to teach you the only proven way I know you could generate 100% income yields on your savings every year… for life.
“This means that a $1,000 investment would PAY you $1,000 or more every single year….
“And in the best cases, you can even make much more than that – up to 10 times your original investment paid directly to you.
“Again, that’s every year.
“And it doesn’t require any leverage, options or any gimmicks.”
No, but it does require good fortune (or good luck, if you prefer), and usually a lot more TIME than is implied. You’re not likely going to get 100% income yields “every year” — but perhaps, if it works out well, you’ll start to get something like 100% income yields on your initial investment starting 10, 20 or 40 years from now. There are a few rare examples of that happening faster, from turnarounds or surprise growth, but there are a lot more examples of it not happening at all — and, of course, a newsletter ad copywriter can come up with a historical chart or example of anything… the number of odd windfalls that have happened in the market over the past 100 years is amazing, particularly if you don’t compare it to the number of surprise stock price collapses.
So… do we think Lichtenfeld has found some great “Extreme Dividends” for us? He hints at three that are his favorite “extreme dividends,” after going through a basic checklist of what he looks for
Before we start, here’s an example from the several he cites of these “extreme dividends” in the past: PetMed Express (PETS)
“Lichtenfeld describes PETS by saying that “its Extreme Dividend rose SO HIGH, SO FAST, that again, over time, a $5,000 investment started paying $13,332.
“That’s more than double your initial investment, paid back to you every year.”
That’s technically true, but that’s a pretty spectacular case — mostly because PetMed Express was a horrible company 15 years ago and became a pretty decent one more recently. You could have bought shares in 2000 or so for less than 50 cents, when the company was under all kinds of investigations and was facing huge liabilities and all dot-com stocks were crashing, and then a few years later it began to stabilize in the mid-2000s, and even started to pay a dividend in 2010. They raised the dividend pretty quickly, and the annual dividend is now 97 cents/share (for the trailing four quarters), so yes, if you bought at the bottom, 18 years ago, you could be receiving an annual dividend that is larger than your initial investment… though you would have had to sit through a lot of pain along the way, including a 50% drop in the share price this year.
If you want to have a relentless focus on dividend growth, particularly among small and more fragile companies for whom investor sentiment can shift wildly, that can work really well if you’re patient and can handle the volatility and the work of really monitoring those investments… make sure you understand the company well and are very confident that the dividend will continue and grow, sometimes you’ll need that dividend to provide solace during a bad patch. And, of course, diversify and don’t count on just one investment to build your portfolio.
So with those caveats, what are our secret stocks? Here are the clues for the first one:
“Extreme Dividend Company No. 1: The Real Estate Juggernaut
“The first company I’m targeting is a very young real estate company.
It was founded in May 2014 in Columbus, Ohio….Are you getting our free Daily Update
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