Dividend aristocrats allow investors to harness compounding returns of both capital gains and continually increasing dividends.
I couldn't believe the returns I was seeing. Could investors really generate this much money by using this strategy?
I emailed Wall Street Daily's Matt Weinschenk, my go-to guy when I have questions about quantitative or mathematical issues. "Can you check these numbers? They seem a bit high to me," I wrote.
I was using a financial model on an Excel spreadsheet to figure out a way that investors could generate double-digit yields and returns over the long term. The theoretical returns that the model said were possible were enough to satisfy nearly any investor.
A short time later, Matt emailed me back. "Yes, these numbers are accurate. And they're not just theoretical. Check out the attached." Matt was referring to a screen shot he attached to the email that showed some startling figures.
Using this strategy, an investment in Southern Company (NYSE: SO) 10 years ago had an average annualreturn of 11.4%. That compares to the S&P 500, which only rose 9.5% over the entire decade.
If you go back 20 years, the returns were even more impressive. A $10,000 purchase of Colgate-Palmolive (NYSE: CL) grew to $102,190 – a return of over 900%.
It's why I call this investment methodology "The Only Investing Strategy You'll Ever Need to Become a Millionaire (or Stay One)." It's the topic of my presentation next week at the Investment U 14th Annual Conference in San Diego.
One thing you'll notice about the two stocks mentioned so far, they're not exactly exciting names. You won't find them on anyone's hot lists or must-buys for 2012. Yet these companies and others like them outperform the market year after year, decade after decade, because they have one thing in common: They pay dividends and raise them every year.
I looked at hundreds of stocks. Most of them are what you'd consider boring companies. Companies such as Coca-Cola (NYSE: KO) and McDonald's (NYSE: MCD) – they all produced stunning results when you invest over many years. And if you reinvest the dividend over those years, look out, your returns really get amplified.