Corporate America's $1.7 Trillion "Problem" Could Lead To Huge Dividend Yields
Friday, January 25, 2013
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Corporate America's $1.7 Trillion "Problem" Could Lead To Huge Dividend Yields

-- By Paul Tracy

It's time to take advantage of corporate America's $1.7 trillion "problem." This "problem" could actually lead to massive dividend increases, and an overall once-in-a-lifetime investing opportunity. (Full Story Below)

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Corporate America's $1.7 Trillion "Problem" Could Lead To Huge Dividend Yields

Right now corporate America has a huge problem on its hands.

I'm not talking about another banking crisis, real estate crash, or hedge fund manager running a Ponzi scheme...

And I'm not talking about any sort of ominous regulations being handed down by the U.S. government, either.

I'm not even talking about the growing levels of debt being accumulated by Uncle Sam each and every day -- not to mention the lack of progress from our leaders in Washington in finding a solution to fix it.

Actually, the "problem" I'm about to tell you about is really a once-in-a-lifetime investing opportunity.

The problem?

Corporate America has spent the last few years hoarding money like it was going out of style, effectively creating what I call a "Dividend Vault."

It started back at the height of the 2007-2008 financial crisis. Acting out of fear, companies started hoarding cash as banks stopped lending and the economy came to an abrupt halt.

And now this "Dividend Vault" is so large, many companies simply can't decide what to do with all that cash.

The only solution: start paying that money out to shareholders as dividends.

A select few companies are already seeing the writing on the wall. They're tapping into the "Dividend Vault" and using it to increase their dividend payouts, rewarding smart shareholders who knew about the "Dividend Vault" early on.

These investors appreciated the fact that these companies were saving for a rainy day. And now, they're being rewarded...

For example, Neva M. from Sweet Home, Oregon recently said she is "currently earning $22,000 per year in dividends" thanks to the "Dividend Vault."

So how big is this "Dividend Vault"?

According to information on an obscure form labeled "Z.1" buried deep inside the Federal Reserve's website, U.S. companies now have a combined cash stockpile worth $1.7 trillion.

That's more money than the GDP of 180 countries.

It's also enough money to give every retiree in the U.S. a check for $42,500.

Of course, these companies aren't going to pay that out all at once. But you'd be surprised by the sheer magnitude of this opportunity. For example, S&P Senior Index Analyst Howard Silverblatt recently told The Wall Street Journal that S&P 500 companies paid a record $281.5 billion in dividends in 2012 -- up 17% from 2011 and 14% higher than the previous record set in 2008.

And he says, "the only way for there not to be a record in 2013 is for mass cuts in dividends..." But with all that extra cash sitting in the bank, I don't expect that to happen.

Right now, investing in the "Dividend Vault" is much more lucrative than, say, 10-year treasury notes... which yield about 1.87%. Also, the average yield of dividend-paying companies in the S&P 500 is not much better, yielding 2.6%.

I've already gone on record saying that we're headed for a "Dividend Decade" -- a period where ALL of the market's returns in the next decade come from dividends.

That's why I'm so convinced you need to own shares of companies that are tapping into their huge cash balances, or "Dividend Vaults."

My research team and I have identified 13 "Dividend Vault" companies that are likely to pay out billions for years to come.

We predict that these 13 companies will account for roughly 10%, or $30.1 billion, of all dividends paid by major U.S. corporations in 2013.

One "dividend vault" company could pay a 45% dividend yield right now if it wanted to.

With its wide economic moat (a 67% market share to be exact), this "Dividend Vault" stock has accumulated $45 billion in cash, which comes out to a whopping $8.48 per share... or enough to pay a special dividend that would make for a 45% yield.

Another "Dividend Vault" stock is one I call "the most shareholder friendly company on earth." (You won't believe which company it is.) In just four years, the company has raised its dividend 85% and bought back 467 million shares of stock. Its shares have also returned roughly 100% since 2008 and 35% in the past year.

But these aren't the only reasons I like these companies. In my latest research video, I explain why these two companies, plus my 11 other "Dividend Vault" favorites, are not only likely to pay out hefty dividends for years to come, but also have the potential to deliver big share price gains.

While there are no guarantees with investing, I strongly believe investing in the "Dividend Vault" is going to be the best way to beat the market for years to come.

All the best,

Paul Tracy
StreetAuthority Co-founder and Chief Investment Strategist

P.S. -- To learn more about the "Dividend Vault", including the names and ticker symbols of some of my favorites, click here.

Disclosure:  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

After releasing a positive earnings report Friday, Proctor & Gamble (NYSE: PG) upped its share buyback program to $5 to $6 billion, from $4 to $5 billion. 

--  Research Staff

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