People have mixed feelings about fast-food chain McDonald’s.
But whether you appreciate its convenience and globally cheap prices or think it’s part of the bigger problem contributing to poor health… there’s one thing no one can deny: The company treats its shareholders well.
It’s raised its dividends for 43 consecutive years. That makes it the kind of stock coveted by income investors – like investing legend Warren Buffett. He attributes much of his massive wealth to dividend-paying stocks.
It’s not hard to see why. If you’d invested $10,000 in McDonald’s at the beginning of 1990, your stake would’ve been worth almost $230,000 by the end of 2019. Along the way, the dividend would’ve grown from just $96 per year to a healthy $5,482.
By the end of 2019, the dividend alone would’ve been worth more than half your original investment amount.
So you can see how holding great, dividend-paying companies over the long-term can lead to serious wealth and large, spendable income.
Now, imagine doing that with a portfolio of McDonald’s-like stocks. It’s the type of strategy that can secure your retirement.
That’s how I got my start at Palm Beach Research Group, working for Mark Ford and Tom Dyson.
Mark wanted to launch a service similar to Buffett’s failproof, sleep-well-at-night method. His goal was to safely build wealth over time, without having to worry about trading in and out of stocks or the portfolio blowing up.
We called it the Legacy Portfolio.
Our game plan with the Legacy Portfolio was simple: Identify the right type of stocks, buy them at good prices, and hold on to them, so time (and compounding, which we’ll talk more about later) could work its magic.
The key to that strategy was dividend-paying stocks. But not just any dividend-paying stocks… They had to be companies that demonstrated they could raise dividends year in and year out.
With those dividends, we purchased even more shares. Which led to an ever-growing dividend income stream. That’s the magic of compounding.
But there’s a problem. This type of investing just isn’t viable anymore today…
The COVID-19 pandemic has completely changed the game.
And today, I’ll tell you why you need to change your investing game, too.
We’re Headed for an Income Crisis
With the world in turmoil, companies are concerned about maintaining their operations. So they’re looking to preserve cash… secure their balance sheets… and ensure stability. And that means dividend cuts and suspensions.
During the second quarter of 2020, companies across the board cut their dividends by $42.5 billion. That’s the largest decline since the first quarter of 2009, during the Great Recession.
And if this recession plays out anything like 2009, there’s more to come. During that time, the total dividends paid fell by 23%.
So far during coronavirus, companies have slashed dividends by 9%.
For example, this year:
Media stalwart Disney suspended its dividend in the second quarter. The move costs investors $1.4 billion. This ends Disney’s 10-year streak of raising its dividend.
Venerable bank Wells Fargo slashed its dividend by 80%. That will cost income investors nearly $7 billion annually. And it ends the company’s nine-year streak of dividend raises.
And aerospace giant Boeing completely paused its dividend. Before this, it had raised its dividend 14 out of the last 16 years. The move will cost income investors $4.6 billion.
Long-term dividend investing just isn’t what it used to be.
Plus, the leaders of the market today (apart from Apple), the FANG stocks (Facebook, Amazon, Netflix, and Google’s parent company Alphabet), don’t even pay dividends.
So what’s an income investor to do in this market?
At PBRG, we have a plan in place to adjust to this new environment and still earn “dividends” from what we call “Tech Royalties.”
Since we started using this strategy less than two years ago, we’ve seen average yields of 10%… and as high as 50%.
Today, I’ll tell you why you need to set aside some of your retirement assets in this new type of income-generating asset – if you want to survive the income crisis in the stock market.
How Tech Royalties Work
Daily editor Teeka Tiwari says there’s a beauty to diversifying into Tech Royalties…
You can achieve massive capital appreciation along with massive yields… without risking massive amounts of capital. We call this asymmetric-risk investing. That means you can have huge upside from just a handful of tiny investments… even as small as $200.
But to understand Tech Royalties, you first need to understand the concept of a royalty.
A royalty is a payment one party makes to another that owns a particular asset, for the ongoing right to use that asset.
Take a computer manufacturer, for example. It pays Microsoft a royalty for the right to use its operating system on the computers it makes.
Gold mining is another popular example. Gold producers get upfront capital from gold royalty companies. And in exchange, the royalty companies get a percentage of the production over the life of the mine.
This exchange benefits both parties:
The gold producers get the capital they need to start and run their mines. And often at better terms than what they’d get from traditional banks.
And the gold royalty companies can build a diversified portfolio of royalty assets that give it an income stream. They can also benefit from exploration upside, which could increase production and the life of the mine.
Today, you can get royalties from crypto assets, too. Similar to how a gold royalty works, you can become your own “Tech Royalty.”
The process is called “staking.” It’s the action of locking your crypto assets (i.e. your stake) to help secure the network. And in exchange, you earn rewards.
You benefit just like a gold royalty company. You get to make use of your asset – in this case, your crypto tokens – to receive rewards in the future. And just like the growth a mine sees from exploration, you can benefit even more as a project’s network grows over time.
The Future Is Crypto
Look, COVID-19 has completely changed the game. It’s brought a triple-whammy of roadblocks for income investors.
Dividends are getting cut and slashed. Buybacks are disappearing. And savings rates remain ultra-low.
Meanwhile, no one knows when COVID-19 is going to end or when the effects of this pandemic will subside.
And it may take years before the economy recovers.
For years, income investors sought Legacy Portfolio-caliber stocks for their decades-long streaks of dividend payments. But even these companies are buckling under current conditions and can no longer offer safe income and returns.
So if you want to find income, you’ll need to think outside the box. In the future, investing will require looking into new assets like Tech Royalties.
As the world wakes up to the amazing potential of these crypto assets in the coming months… by changing your game today, you’ll already be miles ahead.
Analyst, Palm Beach Daily
P.S. As I mentioned above, crypto adoption will skyrocket over the coming months. And Teeka believes it’ll spark a once-in-a-lifetime opportunity…
But starting with its underlying blockchain technology, we believe we’re about to see the biggest wealth and power shift in U.S. history.
Those who take the right steps now could fantastically grow their wealth… Those who don’t will be left behind.