Ian Wyatt here, with your first edition of Market Traders Academy.
Today I’m sitting down with our esteemed income expert Steve Mauzy. I’ve been working with Steve for the last decade. And he’s become my No. 1 resource for top income ideas.
Steve’s research has uncovered a startling – and surprisingly simple – strategy for collecting big dividends. The results have been downright impressive:
82% of his trades have been winners. And the average dividend yield is a staggering 13.1%!
Next week, we’re hosting a LIVE webinar to reveal Steve’s strategy:
Collect 13.1% Dividend Every 4 Weeks
IAN: You’re a Chartered Financial Analyst. That’s a really big deal. You could apply your analysis skills to ANY type of investments. Why do you focus on income investing?
STEVE: Because income investing IS investing. Everything else is speculation.
Investing is about cash flow, specifically cash that flows to investors. The cash flow comes to the investor as dividends, distributions, rents, royalties, and interest payments. Investments are valued on the present value of these future cash flows. And income that flows to investors is the most tangible and most important aspect of a company’s cash flows.
This is different than speculating. When investors talk about the future potential price of an asset, they are really just speculating. There’s nothing wrong with speculating . . . but speculating isn’t investing. An asset is only an investment if it offers the potential to provide income to the investor.
IAN: It’s a tough world for income investors. In my own portfolio, I try to balance high yield with dividend growth. High-yield stocks that pay 5% or 7% dividends are attractive, but they don’t offer much room for capital appreciation. Meanwhile, the dividend growth stocks typically pay tiny dividends of just 1% or 2%.
How do you balance high yield today with the desire for long term profits?
STEVE: Investing for dividend growth and for high yield are two entirely different strategies . . . but they’re not mutually exclusive. Most income investors can benefit from combining both strategies.
Dividend growth, though you might start with an initial low yield, will produce a large yield on your initial cost basis over time. For example, Cisco Systems (NASDAQ: CSCO) is one of my top recommendations. When I first recommended shares in 2014, they were yielding just 3%.
Since then, Cisco has increased its dividend several times. As a result, shares are paying out a 5% dividend based upon my cost basis.
An extra bonus is that as the dividend has increased, so has Cisco’s share price. The stock is now up $10 from my initial recommendation price. As the dividend goes, the share price rises too.
Of course, many investors also need immediate high-yield income, so don’t overlook investments with a high starting yield. To be sure, most high-yield investments don’t offer much price potential. That’s because they are investments designed to pay high immediate income. The best high-yield investments are stable and provide the high-yield immediate income many investors desire.
IAN: Last year, you made a startling discovery. You stumbled upon a unique strategy for finding the best stocks with the biggest dividends. I was shocked when you shared your research on these one-day payouts of 5% to 60%. Tell me a bit more about how you uncovered these big payouts.
STEVE: I noticed that companies that declared an unexpectedly large dividend payout were frequently rewarded with positive price action. The share price would be bid higher after the dividend was declared. Plus, the positive price action would persist after the unexpectedly large dividend was paid. This showed me that these dividends were powerful signals. They signaled better days ahead for the company. After all, you don’t announce a large dividend increase if you can’t afford to maintain it.
I extrapolated my findings on these unexpectedly large regular dividends to special dividends. Could the right special dividends produce the same positive price action and return potential? The good news is that the right special dividends offer even better price action and even higher return potential.
IAN: That’s pretty exciting. What’s going on with these big dividends right now?
STEVE: 2017 is shaping up to be a very big year. I’ve already entered five new special-dividend trades. The yields on these new special-dividend trades have ranged from 5.3% to 15.9%. What’s more, two of these new trades have already been closed at significant profit. Since we started trading in special dividends last year, 82% of our special-dividend trades have been closed at a significant profit.
IAN: There is a lot of talk about tax reform in Washington, D.C. President Trump wants to drop the corporate tax rate from 35% to 20%. What would happen to dividends if the tax rate is slashed?
STEVE: We’ll see more regular dividends and more special dividends, to be sure. Lower income taxes mean more net income coming in to companies, which means more cash going out as dividends. Not all this cash can be put to work to generate a required rate of return on investment. This means more companies will be keen to distribute excess cash as dividends ̶ both regular and special.
IAN: U.S. companies have more than $2.5 trillion stashed in offshore tax heavens. Microsoft and General Electric each have more than $100 billion outside the U.S. And Apple has more than $90 billion.
Is it possible that some of this cash could be distributed to shareholders? Think it will happen in 2017?
STEVE: Yes, it could happen. President Trump has said that he’d like to see a one-time repatriation rate of 10% to entice companies to return this offshore cash to the United States. This could lead to a huge increase in special dividend declarations. Again, not all this cash be put to work profitably.
The last repatriation tax holiday was back in 2004. Research from the National Bureau of Economic Research found that for every dollar of repatriated cash, companies increased dividend payouts by $0.60 to $0.92. If this repeats in 2017, it will be the biggest year for dividends ̶ EVER.
We’re ready for a huge wave of big payouts in 2017 and 2018. And that makes right now the best time to get started with these income trades.
IAN: Thanks for your time today!
Right now is one of the best times to start trading special dividends.
Steve’s presentation next week will reveal all the details ̶ including his exclusive trading strategy. Plus, I know Steve is planning to share the names of at least two companies that are on his Dividend Watch List.
Registration is now open for Steve’s upcoming webinar.
Just click here to RSVP right now. It’s 100% free to attend.
Yours in Profits,