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The Best Way To Profit From The "Dividend Decade"
Saturday, December 22, 2012
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The Best Way To Profit From The "Dividend Decade"

-- By Paul Tracy

In the next 10-years I predict all of the market's total return will come from dividends. But, a carefully-selected group of stocks will see both capital gains and rising dividend payments... (Full Story Below)

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The Best Way To Profit From The "Dividend Decade"

Most people are going to miss the biggest opportunity to money in the next decade.

A few weeks ago, I told you about the upcoming "dividend decade." I predict there will be no gain in the broader market over the next 10 years (adjusted for inflation). Instead, I believe dividends will account for all of the market's total return.

The reason is simple...

During the past 30 years America has grown faster than any time in history. But that growth was fueled by debt. Household debt has soared from 60% of income to 120%.

Now we've reached a point where the average American can't easily take on any more debt. In fact, since the recession, the trend among U.S. households has been toward reducing debt. The bill is coming due on the largest segment of the American economy.

But as I said, this doesn't mean you need to jump out of the stock market. Rather you simply need to know where to invest.

You see, while I believe the market as a whole will remain flat, a carefully-selected group of individual stocks could still see capital gains - in addition to steadily rising dividend payments.

This distinction could make you a lot of money...

As you can see, since its spinoff, Philip Morris (NYSE: PM) -- a boring cigarette company -- has returned 113%. Meanwhile, the S&P 500 has gone nowhere. In that same period, Kimberly-Clark (NYSE: KMB) -- which makes toilet paper, diapers and Kleenex -- is up 65%, and Coke (NYSE: KO) is up 49%.

What do all of these companies have in common? First, they all operate boring, predictable businesses that see steady demand in any sort of environment. That means even in a slow-growing economy, these companies can prosper.

Second, they all have large international operations. These companies aren't focused solely on the U.S. Instead, they've built their businesses outside the U.S., where growth is much faster.

Most importantly, they all have extraordinary track records of growing dividends.

I can't stress enough the importance of rising dividends on your returns -- especially in a flat market.

Take Philip Morris for example. It spun off from its parent company Altria (NYSE: MO) in March 2008. Its first quarterly dividend payment of $0.46 per share gave the stock a yield of 3.5%.

In just over four years that quarterly payment has increased 85%. Anyone who bought just four years ago is earning nearly 7% a year on their original investment -- a figure that will only rise with future dividend increases.

Perhaps equally important, companies that boost their dividends also tend to deliver large capital gains over time.

Brookfield Infrastructure Partners (NYSE: BIP) -- which owns electric transmission grids, ports, and railroads -- has raised its dividend five times, or 41%, since going public in May 2008. It has returned 171%.

Colgate-Palmolive (NYSE: CL) -- which sells toothbrushes and soaps and has raised its dividend 55% in the past 5 years -- is up 55%.

The trend is unmistakable. "Boring" companies that raise dividends beat the market. And staring at the potential for years of slower growth, that outperformance will be even greater in the years ahead.

Remember, the S&P has lost 1% in capital gains during the past five years. But it's gained 10% when you include dividends.

The "dividend decade" is real... and we're already in the middle of it.

[Note: In my newest report -- The Top 10 Stocks For 2013 -- I've identified 10 stocks that are already benefiting from the "dividend decade." During the past five years, these 10 stocks have returned 87%... despite a flat market.

This includes one stock that's gained 137% in three years... another that's raised its dividend 463% since 2004... and another that has more than $9.21 per share in cash (nearly half of its share price).

To learn more about my Top 10 Stocks for 2013, visit this link.]

All the best,

Paul Tracy
StreetAuthority Co-founder, Chief Investment Strategist -- Top 10 Stocks

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Disclosure: StreetAuthority owns shares of PM and BIP as part of the company's various real-money porftolios. In accordance with company policies, StreetAuthority always provides readers with at least 48 hours advance notice before buying or selling any securities in any "real money" model portfolio. Members of our staff are restricted from buying or selling any securities for two weeks after being featured in our advisories or on our website, as monitored by our compliance officer.

Income Notes

As of Friday's close, the 5 highest-yielding stocks in the S&P 500 are:

1). Pitney Bowes (NYSE: PBI) - 13.5%

2). Windstream (Nasdaq: WIN) - 11.2%

3). Frontier (Nasdaq: FTR) - 9.0%

4). CenturyLink (NYSE: CTL) - 7.3%

5). Exelon (NYSE: EXC) - 7.0%

-- Research Staff

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For the next 10 years, I predict there will be little to no gain in the broader market. Instead, I think something else will account for ALL of the market's return.

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