A Vital Update for Income Investors

Welcome to Cabot Wealth Network [Cabot Wealth Network](113/d2zn7704/VWZlm51XGNc-W4XNVfY8FCq4SW4KxtYX53dnMKN8LB06Y3qn9gW7lCdLW6lZ3p2W43rchn6DG2KgW7nMMZQ3z_pM7W99ynG972_bJBW1r_FMn8_jL3mW5TBCFs816Mr8W6tBkfP2pKjbbW5JQ4K12Y7ldsW99ZJVP8t66T-MwnRtpZkcDJW9fmfgP23jwSkW7XnkVy152hF5W8KFHf-6Rh6B3W1kSGQK3LJhPVN7Hfv3HNvB4fW4lZBJ12nzQBtN2pC-7mjyF6mW4LFs3C93g-wWV-nRCM7Pl4NQW8c6CXM2F9Cp-W8GMzkf110s5kN91xW1CfbqxZW5ldtWB7KxG2KW6qnlBd50hDs3W6dq6zC4Lqfhgf7pDnQq04) A Note From Cabot’s CEO, Ed Coburn I’ve put together a special briefing involving an opportunity from one of Cabot’s top analysts. If you’re interested in dividend investing, I highly recommend this guidance from Tom Hutchinson, editor of Cabot Dividend Investor. And make sure you read to the end for a special deal that Tom has put together for new Cabot readers to access his research. Dividend Stocks If you’re serious about making money in the market and want investments that actually have a high probability of working, dividend stocks are your answer. In fact, you’ll be amazed at how realistic it is to grow your wealth and fund your retirement without losing your shirt in the attempt. You’ve probably heard this kind of claim before. But the real truth is that as a whole, dividend stocks simply dominate the market. To prove it, let’s go over some facts about dividend stocks. The Track Record From 1972 through 2018, dividend-paying stocks provided an average annual return of better than 9% compared to just over 2% for non-dividend payers, more than four times the return. Believe me, that makes an enormous difference over time. [Track Record] And it’s not just outperformance. Dividend stocks have achieved such superior returns with less risk and volatility. That’s a big deal, because downside and volatility are the things that scare us out of the market and prevent us from participating in the market’s historical upward trend. Another big part of the reason these stocks have been so successful is because the companies that pay them and grow them are just plain better. Dividends are actually a great indicator of the very best companies to own. Strong dividend payers are predominantly large and mature businesses with proven market niches and competitive advantages. Such characteristics enable them to generate consistent and predictable revenue streams from which they are able to make regular payouts. As the chart below displays, dividend payers as a whole tend to be far more profitable businesses than non-dividend payers. Not All Dividends are the Same Sure, dividend-paying stocks have outperformed the overall market and blown away the return of non-dividend payers. But not all dividend stocks are good investments. This cherished group has its share of dogs too. Choosing a great dividend stock starts with a thorough analysis of the individual company, its industry and the outside environment. Aside from the typical number crunching when considering any stock (i.e. earning prospects, balance sheet, management, etc.) there are some general considerations to make when specifically analyzing a company’s dividend. - Payout ratio The payout ratio represents the percentage of earnings that are paid out in dividends, calculated as earnings per share divided by dividends per share. This number represents how extended the company is paying the current dividend and can reflect if the current dividend is on thin ice or if there is room for growth. It seems simple—but it’s also crucial. A company needs to consistently earn plenty of money from which to pay the dividend. Some companies try to fake you out. But income and cash flow statements tell the tale. This needs to be checked because the market is cruel to companies that cut the dividend. - Earnings growth Earnings fuel the dividend and the stock price. It’s essential that a company exhibits a consistent track record of growing earnings. But even more importantly, there needs to be a strong reason to believe the company can continue to grow earnings in the future. A company needs to have a strong niche in a business that can grow. Ideally, a business should be well positioned ahead of a powerful and undeniable trend such as catering to an aging population or selling to the growing emerging-market middle class. - Dividend growth Just like dividend-paying stocks are a subset of the overall market that have outperformed, stocks with growing dividends are a subset of dividend stocks that have consistently outperformed that group. Between 1973 and 2013 Dividend Growers and Initiators in the S&P 500 returned more than Dividend Payers by more than 10% per year, on average. Companies that have grown their dividend consistently reflects not only consistent earnings growth but management’s commitment to the dividend. Also, growing dividends is a great defense against inflation. Unlike bonds, dividend stocks can increase payments during times of rising prices. The Wealth-Building Power of Dividends There is an income crisis in America. It used to be that a person who retired at 65 didn’t expect to live much longer. Not anymore. Now, people are living another 20 or 30 years after they retire. That’s fantastic. But it also creates a problem. How do you not run out of money? You need an income generated by your money that you can live on without blowing through the principal. Few people have pensions anymore and Social Security is designed to be just a supplement. At the same time, rates on traditional safe-haven investments like CDs and bonds are too low. After taxes and inflation there’s nothing left. Dividend stocks are the only answer out there. You can get a respectable income and hopefully even grow your principal over time. The demand for these investments should be high and that will help boost prices over time. Okay, enough of the theoretical stuff; let’s take a look at some real-life examples. Here’s how a $20,000 investment made 10 years ago (in mid-2012) would have grown with dividends reinvested in some well-known blue-chip stocks. Altria (MO): $60,080.37 PepsiCo (PEP): $73,063.35 McDonald’s (MCD): $64,970.71 Visa (V): $157,540.49 Caterpillar (CAT): $47,999.84 Mind you, these aren’t up and comers in nanotechnology or artificial intelligence. They are household names you can own without worrying. That’s great. But you probably don’t have a functioning time machine that would enable you to go back 10 years and make these investments. Anybody can go back and look at what already happened. The trick is to find great investments for the next 10 years. That’s my goal as the editor of The Cabot Dividend Investor: to help you find long-term stocks that will grow your income for years to come. Normally a full year’s access to Dividend Investor would cost you $597, but through this special offer, you can claim a full 30 days for just one dollar! TRY CABOT DIVIDEND INVESTOR FOR 30 DAYS FOR JUST $1 [Click here to see the full offer.](113/d2zn7704/VWZlm51XGNc-W4XNVfY8FCq4SW4KxtYX53dnMKN8LB0625nXHsW5BWr2F6lZ3kWW1_tzSD2dqD4LVjb2sw4DG6hFW531bw04QGTzXN5ccS6JKTYbLW1-VZlH5snSfrW2zxMGZ80ZQ06W3D77Wd4Y0-Q9W6WZgfp1j9dyWW4Y-1398Yxwp-W5s_jqv1905njW4k7Qp48QJng6W2V98X57yRyGxW7mZCv-8_PKBHW42r44F21mzTvW2slVlv7FQ6SNW78Sh6x7cS-kmV3DdV33kW0__W1pK3XW31yY5-W5bBmK62zg3PdN1jJnPjsYTFsW4R0rGc4g3xL_N90qBlfD_GMjVsw6918lJHRNMRPlJPnjHDkW6yw_b871sbbKW2CqKN06yXmZ4W3-2YTV6H_274W286ZYs8g3sz3W1d-LZH5PKV3hW4vBpYs2y5-NFW52HgSs5fnk3LW2QvylF5PYHtsW4CKMjy7ymJfbW6C6yCm376jWwf5HX_Bb04) Your chance to claim this offer expires soon. Don’t miss it. Thanks for reading, [Coburn sig] Ed Coburn President & Publisher Cabot Wealth Network We understand your email address is private. We promise to never sell, rent or disclose your email address to any third parties. Cabot Wealth Network, 201 Washington St. Ste 215, Salem, MA 01970, United States, (978) 745-5532 [Unsubscribe]( [Manage preferences](