Get Rich with Dividends: A Proven System for Earning Double-Digit Returns

Additional Praise for Get Rich with Dividends

In today's global financial environment, investors would be wise to empower themselves with knowledge and insight. Mr. Lichtenfeld delivers on that mission.

—Todd Harrison

Founder and former CEO, Minyanville Media, Inc.; author of The Other Side of Wall Street

"Marc Lichtenfeld's name may be hard to pronounce, but his guide book is easy to implement. He practices what he preaches with his incredibly successful Perpetual Income Portfolio at the Oxford Club. His book should be called Get Rich Sooner than You Think. Investing in stocks that pay steady and rising dividends will make you a fortune you can enjoy while you're still young!"

—Mark Skousen

Editor, Forecasts & Strategies

Marc has put together a New Bible for Investing. And in the process, he's debunked one of Wall Street's most widely held beliefs: that the average investor simply cannot outperform the market. He can! All it takes is a little legwork to find great companies that pay steady, rising dividends. And Marc's step‐by‐step system makes it easy. So put it to work, get rich, and start spreading the good news.

—Louis Basenese

President & Chief Market Strategist, Public Ventures LLC

Speculators can get lucky occasionally. They can even get rich once in a while. But if you want to build wealth consistently, you have to let your money work for you. There is only one time‐tested strategy for doing this and that is through dividends and reinvesting those dividends. However, investing in dividends is a strategy. Fortunately, you now have one of the best guides and guidebooks in the business. Marc Lichtenfeld is an accomplished researcher, with years of experience in the field of investing and dividends. His information is well thought out, well researched, and well written. Save yourself some time and set yourself up with a perpetual money machine by reading and following Marc's advice—religiously! You will get rich … or richer by doing so.

—Karim Rahemtulla

Co‐Founder, Monument Trader's Alliance; author of Where in the World Should I Invest: An Insider’s Guide to Making Money Around the Globe

Get Rich with Dividends

A PROVEN SYSTEM FOR EARNING DOUBLE-DIGIT RETURNS

Third Edition

Marc Lichtenfeld

Copyright © 2023 by Marc Lichtenfeld. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging‐in‐Publication Data:

Names: Lichtenfeld, Marc, author.

Title: Get rich with dividends : a proven system for earning double‐digit returns / Marc Lichtenfeld.

Description: Third edition. | Hoboken, New Jersey : Wiley, 2023. | Series: Agora series | Includes index.

Identifiers: LCCN 2022054060 (print) | LCCN 2022054061 (ebook) | ISBN 9781119985556 (hardback) | ISBN 9781119985563 (adobe pdf) | ISBN 9781119985570 (epub)

Subjects: LCSH: Dividends. | Portfolio management.

Classification: LCC HG4028.D5 L53 2023 (print) | LCC HG4028.D5 (ebook) | DDC 332.63/221—dc23/eng/20221109

LC record available at https://lccn.loc.gov/2022054060

LC ebook record available at https://lccn.loc.gov/2022054061

Cover Design: Wiley

Cover Image: © Alexander Kalina/Shutterstock

For Holly, Julian, and Kira, who have made me rich in the most important way

Foreword

When it comes to the stock market, most investors prefer glamour to profits.

Why do I say this? Tell average investors about a company with a cutting‐edge technology, an exciting Phase III drug, or a new gold strike, and they are all ears. But tell them about a blue‐chip stock with steady sales, a big order backlog, and a rising dividend yield and they are more likely to stifle a yawn.

That's unfortunate. Because, contrary to what most investors believe, startling innovation is not a good predictor of business success. Or, as the famous steel magnate Andrew Carnegie succinctly put it, Pioneering don't pay.

A young company that is just feeling its oats—and retaining all its earnings—is unlikely to be the best long‐term investment. It's a widely recognized fact that 80% of new businesses fail in the first five years.

What really makes money for investors over time—and without the hair‐raising volatility of hypergrowth stocks—is steady businesses paying regular dividends.

For example, over the past decade, with dividends reinvested, semi‐conductor manufacturer Texas Instruments has returned 642%. Hormel Foods, the maker of Spam, Skippy peanut butter, and Wholly Guacamole, has returned 323%. Even musty old Con Edison, originally founded as New York Gas Light Company—a utility that was born 23 years before Thomas Edison—has returned 137% over the period.

In this excellent new book, my friend, colleague, and fellow analyst Marc Lichtenfeld shows you how and why to invest in great dividend stocks. And let me make two things clear at the outset. Number one, you could not find a more worthy, knowledgeable, or trustworthy guide to the investment landscape. And, second, this investment approach really works.

How can I be sure? Marc runs the Oxford Club's Instant Income, Compound Income, and High Yield portfolios. These are portfolios based solely on growth and income investments. He has done a superb job. In fact, when I looked at the returns recently, I had to ask him, Holy crap, Marc. How do you do it?

Fortunately, Marc shows you how you can earn returns like this yourself. He has made me a believer. At investment seminars today, I tell attendees, if you are looking for growth, invest in dividend stocks. If you are looking for income, invest in dividend stocks. If you are looking for safety, invest in dividend stocks.

Why? Earnings may be suspicious due to creative accounting. Revenues can be booked in one year or several years. Capital assets can be sold and the value listed as ordinary income. But cash paid into your account is a sure thing, a litmus test of a company's true earnings. It's tangible evidence of a firm's profitability.

Regular payouts impose fiscal discipline on a company. And history reveals that dividend‐paying stocks are both less risky and more profitable than most other stocks.

Dr. Jeremy Siegel, a professor of finance at the Wharton School of the University of Pennsylvania, has done a thorough historical investigation of the performance of various asset classes over the last 200 years, including all types of stocks, bonds, cash, and precious metals. His conclusion? High‐dividend payers have outperformed the market by a wide margin over the long haul.

There is an awful lot of fear and anxiety about the economy and the stock market today. Investors are understandably confused and uncertain about what to do with their money.

Marc Lichtenfeld has your solution. He demonstrates that even during market declines, dividend‐paying stocks hold up better than non‐dividend‐paying stocks and often fight the broad trend and rise in value. The reason is obvious: These tend to be mature, profitable companies with stable outlooks, plenty of cash, and long‐term staying power.

Bear in mind that U.S. companies are sitting on a record amount of cash right now, nearly $6 trillion. A lot of this cash is rightfully going back to shareholders. The Dow currently yields more than bonds. And dividend growth among U.S. companies has averaged 11% per year over the past two years, more than double the long‐term dividend growth rate.

The current outlook is especially promising. Since 1980, for instance, the second‐highest 20% yielding stocks in the Standard & Poor's 500 returned 13.9% annually. That's good enough to double your money in under five and a half years—or nearly quadruple it in 10.

I should add the standard caveat here about past performance and point out that there are risks with dividend stocks too. As Marc points out, an investor would be foolish to plunk down money for a stock just because the dividend is large. You have to be selective. The market is full of dividend traps, troubled companies that pay hefty dividends to keep investors from bailing out.

In the pages that follow, you'll learn how to avoid those and zero in on potential winners. Marc shows you how to look at cash flow and payout ratios and whether the dividend is sustainable.

Does this require a bit of legwork? Yes, but the payoff is large.

It astonishes me that investors are willing to lend money to the U.S. Treasury for the next 10 years at just over 3%. What a terrible bet, one that virtually guarantees a negative, real (after inflation) return over the next decade.

A far better bet is a diversified portfolio of dividend‐paying stocks. Over the nine decades through 2021, dividends contributed 40% of the U.S. stock market's return, according to Hartford Funds. Sometimes it was much more. During the 1970s, for example, dividends generated 73% of returns.

Marc makes a strong case that dividend stocks today represent a historic opportunity. Not only are U.S. companies flush with cash, but payouts are less than one‐third of profits, a historic low.

Dividends alone won't generate a mouth‐watering return. But they will rise over time—and surprising things happen when you reinvest them. Picture a snowball rolling down hill.

Albert Einstein understood this. As he observed, money compounding is the most powerful force in the universe. And the best way to compound your money? Great companies that pay steady, rising dividends.

This book is your key because Marc Lichtenfeld does a great job of showing you just where to find them.

Alexander Green

Preface

It was a eureka moment.

I was working on a dividend spreadsheet, changing the variables, when the size of the numbers I saw surprised me. I realized that if my kids’ money was invested according to the formula I was working with, they should never have any financial problems in adulthood, no matter what job or career they chose.

I also recognized that using the same formula, my wife and I should never have to worry about income in retirement.

And last, I understood that if my parents invested according to the formula, they, too, should have no worries about income in old age.

That's when I knew I had to write this book.

Get Rich with Dividends is for the average investor—the investor who is just getting started, the investor who is playing catch‐up, the investor who has been burned by the booms and busts of the recent past, and the investor who trusted the wrong advisor and ended up paying thousands of dollars for worthless advice.

This book is for all investors who are serious about creating real wealth for themselves and their families, investors who are willing to learn a simple system for making their money work as hard as they do (or did). It's easy to learn and implement and takes very little free time. Importantly, it's not a theory. It's been proved to work over decades of bull and bear markets.

And it's designed for investors who have other things they'd rather do than spend hours on their portfolios. Implement the 10‐11‐12 System and let stocks and time work their magic. All that's required is the occasional check‐in from you to make sure the companies in your portfolio are still behaving the way you expect them to. If they are (and you'll learn how to pick companies that are most likely to meet your expectations), no further action is necessary.

As the editor of the Oxford Club's Oxford Income Letter, I receive emails every month from investors who are yearning for higher yields. Current yields aren't cutting it for many retirees. I was inspired to find a strategy that would ensure investors wouldn't be in the same boat in the future as today's income seekers, who are taking on too much risk by chasing yield.

The 10‐11‐12 System outlined in Get Rich with Dividends will enable investors to achieve yields of at least 11% (and possibly much more) in the next 10 years—all while investing in some of the most conservative stocks in the market. These are companies with track records, some decades long, of taking care of shareholders. And if you don't need the income today, 12% average annual total returns (which crush the stock market average) are easily attainable. If your money earns 12% per year, it will more than triple after 10 years, quintuple after 15 years, and grow by well over 10 times after 20 years. In other words, earning an average of 12% per year for 20 years turns a $100,000 portfolio into nearly $1.4 million. And that's with no additional investments.

What would an extra $1.4 million mean to you in retirement? First of all, it might spin off enough income that you wouldn't need to touch the principal. The money could be used for vacations with your family or a grandchild's college education, or it could give you peace of mind that you'll always have the best medical care.

Perhaps most importantly, you'll learn how my 10‐11‐12 System can still enable you to earn significant yields and double‐digit returns in flat or down markets. Despite the nastiest bear market, you'll be sleeping comfortably, even smiling, once you implement my 10‐11‐12 System.

As you make your way through this book, you'll learn everything you need to know to become a successful investor. It's easy to read and even easier to get started.

In Chapters 1 and 2, we go over why dividend stocks are the best kind of investment you can make for the long‐term health of your portfolio. Since you don't want to invest in just any old company paying a dividend, we discuss the special kind of stocks that you should select and how to find them.

I don't expect you to simply take my word for the claims I'm making, so in Chapter 3, I show you how I arrived at the various numbers, taking you through examples of how your income and total return can grow every quarter, with an example of how the 10‐11‐12 System still works and even thrives in bear markets.

In Chapter 4, we look at the big picture and the reason companies pay dividends. You'll understand why it's an important factor in determining the health of a business.

You'll see why certain conservative stocks are your best bet in Chapter 5. There's no reason to take excess risk to achieve your goals when some of the most conservative stocks on the market will achieve better results.

Chapter 6 discusses some interesting types of stocks you may not be aware of—stocks that typically yield more than regular dividend payers.

In Chapter 7, we lay the foundation for your portfolio, and then Chapter 8 is where you'll learn all about the 10‐11‐12 formula that you'll use to set you and your family up for long‐term, double‐digit yields and returns.

In Chapters 9, 10, and 11, we go over dividend reinvestment plans, options, and foreign stocks—all ways to turbocharge your returns.

Chapter 12 is about everyone's favorite subject—taxes. Even if you use a CPA to do your taxes for you, be sure to read Chapter 12, as there is important information that can make your investments much more tax‐efficient.

Chapter 13 covers dividend paying cryptocurrencies. Some readers may feel that if a cryptocurrency pays a dividend, it must be safer than other cryptos. I detail where these dividends come from and whether or not they are smart investments.

And we wrap it all up in the conclusion and set you on your way to a lifetime of market‐crushing returns and nights of worry‐free (at least about your portfolio) sleep.

The strongest endorsement of the 10‐11‐12 System that I can make is this: I'm using it for my investments and for my kids’ money as well.

Writing this book has been a labor of love because I know there will be thousands of families who will achieve financial freedom, be able to send a kid to college, make a down payment on a house, and enjoy retirement as a result of following the 10‐11‐12 System.

I'm glad yours will be one of them.

CHAPTER 1

Why Dividend Stocks?

Let me start by making a bold statement: The ideas in this book are among the most important gifts you can give to yourself or your children. On the pages that follow is the recipe for generating 11% yields and 12% average annual returns for your portfolio—significantly more if the stock market cooperates or your particular stocks cooperate.

I'm not trying to brag. I wasn't the one who first came up with the idea of investing in dividend growth stocks. I just repackaged it in a compelling, easy‐to‐read book that you will cherish for a lifetime and want to buy more copies of for all your friends and family. Or at least lend them yours.

How do I know? Because more than 125,000 copies of the first two editions of Get Rich with Dividends have already been sold. (Okay, now I'm trying to brag.) In addition to English, Get Rich with Dividends has been published in Japanese, Thai, and Polish. I can't even walk the streets in Gdańsk.

Enough jokes (for now). What I did was create an easy‐to‐learn system for investing in dividend growth stocks. You'll not only understand why dividend growth investing is one of the most lucrative and uncomplicated ways to invest but also learn the simple steps of how to do it.

If you follow the ideas in this book and teach them to your children, it's very conceivable that many of your concerns about income in the future will be over. And perhaps just as important, if your children learn this strategy at a young age, they may never have financial difficulties. They will have the tools to set themselves up for income and wealth far before they are ready to retire.

I've seen the results firsthand, and so has my family. Eleven years ago, when I was working on the first edition, my then‐10‐year‐old son asked me what I was writing about. I explained the concept and showed him my spreadsheet. He eagerly said, You mean if I invest some money now, when I get out of college, it should be worth three times as much? I let him know that there are no guarantees but if history is any guide, then, yes, he should.

A short time later, we set up his account. Between May and June of 2012, we bought $2,572 worth of stock. All were stocks of companies that regularly grew their dividends.

I'm happy to report that the kid is graduating college this year and those stocks are worth $8,969 with dividends reinvested. That's a 248% total return, or a compound annual growth rate (CAGR) of 13.3%, beating the goals of this book by 1.3 percentage points.

During that period, we had civil unrest, the impeachment of a president, Russian interference with a presidential election and the attempted overturning of that election, a pandemic, and plenty of conflict around the world.

Yet stocks did what they almost always do over the long term. They went up.

Keep in mind that I cannot teach you or your kids how to save money. If you would rather buy a new car or take a costly vacation at the expense of putting money away, I can't, and won't, attempt to fix that. This book is for the people who are serious about improving their family's financial lives, already know how to save, and are trying to make that money work as hard as they do.

As far as saving money is concerned, the only advice I'll offer can be found in one of my favorite finance books, The Richest Man in Babylon by George S. Clason. In that book, first published in 1926, Clason writes, For every ten coins thou placest in thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to thy soul.

Many personal finance gurus proclaim the same advice but with a more modern bent to it, stating, Pay yourself first.

Even if you are not able to save 10% of your current income, saving anything is crucial. As you will see, the money you save and invest using the ideas in this book will grow significantly over the years. So if you can save only 8%, 5%, or even 2%, start doing it now. And if you get a raise or an inheritance or win the football pool, do not spend a dime of it until you have put away 10% of your total income.

And it's easier to invest today than it was just 11 years ago when I wrote the first edition. Today, trading at most discount brokers is commission‐free. And you can even buy fractions of shares if you don't have enough to buy a full share of your favorite stock.

Here's a scary statistic. According to a 2020 study by PwC, the average 55‐ to 64‐year‐old's retirement account held just $120,000. That will generate less than $1,000 per month in income over a 15‐year time period.¹ The average Social Security