TheDividendBible 1

Copyright 2015 by Weiss Research

Income Superstars 4400 Northcorp Parkway

Jupiter, FL 33410 Phone: 1-800-400-6916 Fax: 561-625-6685

Publication Date: February 2015

All rights reserved. No portion of this guide may be reproduced without written permission from the publisher.

ISS0033

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TableofContentsIntroduction: The Road to Higher Income Begins Here! ..................................................................................... 3

Chapter 1: The Power of Dividend Stocks ........................................................................................................ 4

Chapter 2: Two Special Types of Dividend Stocks ........................................................................................... 9

Chapter 3: A Preferred Share Primer ............................................................................................................. 11

Conclusion: Your Next Step Toward Inevitable Wealth! ................................................................................ 12

About the Author: Nilus Mattive .................................................................................................................................. 13

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Introduction:TheRoadtoHigherIncomeBeginsHere!

Welcome,andthanksforjoiningIncomeSuperstars!

Thegoalofthisguide,andofmyservice,istohelpyougetterrificincomefromyournesteggwithoutsacrificingsafety.

How?Byusingdividendstocks!

Iprobablydontneedtogointoallthereasonsdoingsoisabsolutelycritical.

YouprobablyknowalltoowellthatWashingtonisnotonlystarvingretireeswithitslowinterestratepolicies,butthatitsactivelyencouragingthemtoplowtheirhardearnedmoneyintoriskyassetsjusttogetareturnabovezero.

YouknowthatSocialSecurityisriddledwithproblems.Thatourcountryshealthcaresystemisadisaster.Thatpensionsandotheroldstandbysaremoreuncertaintodaythanatanyothertimeinourhistory.

Soletsjustgetrighttothesolutions.Strategiesandinvestmentsthatcanhelpyounotonlykeeppacewithrisingcostsforgas,healthcareandfoodbutalsoallowyoutohavealittlemoneyleftoverforyourselfandtheretirementyoudeserve.

Sincerely,NilusMattive

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Chapter1:ThePowerofDividendStocks

Whenyouthinkofincomeinvestments,bondsmightbethefirstthingthatcomestomind.Icanseewhyallbondsareincomeinvestments.

Withstocks,thesituationisnotsocutanddried.Infact,alotofstockscantclaimthetitleofincomeinvestment.Considerthefollowingexample:

Youdecidetobuysomestock inasmallsoftwarecompany.For$1,000,youreable tobuy100 sharesof thecompany ($10a share).You thinkthecompanysnewsoftwarewillbeabigsuccess,earningthefirmalotofmoney intheprocess.Becausethecompany isyoungandgrowing, itwillprobablyplowallthoseprofitsrightbackintoitsbusiness.Butatthesametime,yourstakeinthecompanywillalsogrowinvalue.Simplyput,yourhopeisthatyour100shareswillsellformuchmorethan$1,000bynextyear.

Ifyourplanworksout,andyoursharesrise,youllbesittingonsomenicecapitalappreciation.Whenyousellyourstock,youllbookthiscapitalgainandwalkawayquitehappily.

Now,allstockshavethispotentialtoriseinvalue.However,somealsogiveyouregularpaymentsalongtheway.Considerthisexample:

Insteadofbuyingastakeintheyoungsoftwarecompany,youdecidetoplunkyour$1,000downon50sharesofawellknowntobaccocompany.Becauseitsfairlyoldandestablished,youdontexpectthecompanytoexpandasrapidlyasthatsoftwarefirm.Butyoualsodontexpectittoplowallofitsprofitsbackintothebusiness.Rather,youexpectthecompanytodistributesomeofitsprofitsbacktoyouandtheotherownersonaregularbasis.

Whencompaniesrewardtheirownerswithregulardividends,thingsgetreallyinteresting:Yourtobaccosharescanstillriseinvalue!However,whenyouinvestindividendpayingstocks,youhavetheaddedbenefitofgettingpaidaregularfixedamountwhileyouwait.

Itsthiscombinationofcapitalappreciationanddividendincometotalreturnthatgivesyouthebestofbothworlds.

Itmaysoundlikeanobrainertoyou,butitsamazinghowmanyseasonedinvestorsstillignorethepowerofdividends:Simplybyrecognizingthatonlysomecompaniesdistributeaportionoftheirprofitstotheirshareholdersgivesyoualegup.

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However,Idontthinkitsenoughtopickafewdividendpayingstocksandcallitaday,especiallynotinanincomeportfolio!

Thatswhyyoushould

LookforStockswithSteadilyIncreasingDividends

Ifyouwantsolid,longtermtotalreturns,Iknowagreatplacetolook:Companiesthathavelonghistoriesofsteadilyrisingdividends.

Bydefault,mostofthesefirmswillhavefairlystablebusinesses,steadyearnings,andestablishedpositionsintheirrespectiveindustries.Theresnootherwaytheydbeabletoconsistentlypayoutmoreandmoremoneytotheirshareholders!

Ofcourse,thatsjustthebeginning.Theresanevenbiggerbenefitofowningstockswithsteadilyrisingdividendsanditdoesntgetmuchplaybythemainstreaminvestmentcommunity.Theconceptiscalledyieldoncost.

Sayyoubuyastockfor$10ashareanditspayinganannualdividendof$0.50.Youreimmediatelygettinganiceyieldof5%.Notbad!

Now,whatifthecompanyboostsitsdividendby$0.05ashareeveryyear?Tenyearslater,thestockwillpayanannualdividendof$1ashare.

Assumingthecompanyhasbeendoingwell(thisisalmostagivenifitsbeenabletoincreaseitsdividend),yourstockhasprobablyriseninvalue.Letssayitsdoubledto$20ashare.

Ifyourdividendisnow$1,thestocksyieldisstill5%(1dividedby20).Butisthattheyieldyoureactuallygetting?

Afterall,youonlypaid$10forthestock.Thatannualdividendof$1actuallyrepresents10%ofyouroriginalpurchaseprice!Thatsyouryieldoncost.Manyinvestorsfailtorecognizethissimplefact.

Sogivenproperselectionandabitofpatience,buyingandholdingstocksthatsteadilyincreasetheirdividendscanproducelevelsofincomethatarevirtuallyimpossibletofindfromotherinvestments.

Willyourfriendsbeimpressedwiththispatient,longtermapproach?Maybenot.Butinmyview,investingisnotaboutexcitementorbraggingrights.Itsaboutmakingmoney.

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Andherestheirony:Whileyourfriendsareoutchasingtheirsocalledhottips,manyoftheseunexcitingcompaniesarequietlydoubling,tripling,andquadruplingboththeirsharepricesandtheirpaymentstoshareholders.

Intodaysdifficultenvironment,manycompanieshavestoppedincreasingtheirdividends,andsomehaveevendiscontinuedtheirpaymentsaltogether.ButIwantyoutoknowthattherearestillplentyoffirmsrewardingtheirshareholderswithhigherandhigherdividends.

Imgoingtodomybesttohelpyoufindthem,usingthefollowingtwogoldenrules:

#1.Wewillinvestincompanieswithsteadilyrisingdividendswheneverpossible.

Ivealreadyexplainedwhyabove.

#2.WewillNOTseekoutstockswithyieldsthataretoogoodtobetrue.InsteadwewillconcernourselveswithdividendSECURITY.

Manyincomeinvestorshaveanoverlysimpleapproachgoforthestockswiththehighestpossibleyields.Period.

Butlookingonlyatastocksyieldcouldbeabigmistake.Ifanything,ayieldthatiswayaboveaverageisoftenagiantstopsign.Afterall,whenacompanyisdoingpoorly,itsstockpricefalls.That,inturn,pushesupthestocksyield.

Sure,ifthestocksweaknessistemporary,youcouldhaveagreatinvestmentonyourhands.Sometimes,themarketservesuptheseraregifts.

However,themorelikelyscenarioisthatthecompanywillcontinuetostruggle.Ifitstruggleslongenough,itmightevenconsidercuttingitsdividend.AndwedoNOTwantthatinourincomeportfolio.

SohowwillImakemydecisions?

First,Iwilllookattherecenttrendinthestocksdividendpayments.Havetheybeenrising,falling,orstalling?

Second,Iwillcheckoutthecompanyitself.Thisentailslookingatitsfinancialstatements,pastearningsreleases,competitiveposition,andindustryfundamentals.

Third,Iwillfavorsectorsandindustrieswhereitsnormaltopayoutaboveaveragedividends,butalwayskeeptheyieldincontext.

Letmeelaborateonthatlastpointwithanexample:Manyutilitiessporthighyields.Therefore,autilitywithahighyieldshouldntnecessarilyarousesuspicion.

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Ontheotherhand,autilitywithayieldthatsthreetimesashighasthoseofotherutilitystocksshouldbeinvestigatedmoreintenselybeforeyouputdownyourhardearnedmoney.

Now,HereAreTenThingstoKnowAboutDividends

#1.Ingeneral,acompanycanchoosetoinitiate,suspend,raise,orloweritsdividendatanytime.Dividendsarenotguaranteed.

#2.However,ascashpayments,dividendsarenonrefundable.Unrealizedcapitalgainscandisappearifastockfalls,buttheminuteadividendisdepositedintoyourbrokerageaccount,itsyourstokeep.

#3.Dividendsareoneofonlytwowaysyoucanmakemoneyfromstockswithoutlosingownership.(Coveredcalls,whichItalkaboutinaseparatereport,aretheotherway.)

#4.Dividendsareusuallypaidinquarterlyinstallments,buttheycanalsocomemonthly,annuallyoronsomeotherschedule.

#5.Somecompaniesalsoissuespecialonetimedividends.Forexample,ifacompanysellsoffaportionofitsbusiness,itmightchoosetodistributetheproceedstoinvestors.

#6.Astocksindicateddividend(alsoknownasthecurrentdividend)istheamountaninvestorshouldreceiveoverthenextyear.Forexample,ifastockcurrentlypaysaquarterlydividendof$0.25ashare,itsindicateddividendis$1ashare.Specialdividendsarenotincludedintheindicateddividend.

#7.Investorswilloftentalkaboutastocksyield.Theconceptissimilartobondyieldsi.e.yieldisequaltotheannualregulardividendpaymentdividedbythestockscurrentprice.Ayieldisalwaysexpressedasapercentage.Forexample,a$10stockthatpaysanannualdividendof$1asharehasa10%yield.

#8.Unlikeearningsorsales,adividendisnotanabstractaccountingconstruct.Acompanyonlyhastwochoices:Paythedividendordont.Thisisanimportantfact:Ifacompanydoesnthavethemoney,itcannotcoveritsdividend.

#9.Historically,stocksthatpaydividendsarelessvolatileandhaveweatheredbadmarketsbetterthantheirpeersthatdontpaydividends.Forexample,in2002theworstyearforstocksindecadestheS&P500fell23%.DividendpayersintheS&P500onlylost11%whilenonpayersfell30%!

#10.Mostcommonstockdividendscomewithfavorabletaxtreatment,too.

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Whenyouthinkofdividendshares,alotofbluechipnamesprobablycometomindandrightfullysomostofAmericasoldest,mostrecognizedfirmsdoleoutregularpaymentstotheirinvestors.

Restassured,IllcontinuerecommendingsomeoftheminIncomeSuperstars.Aswellastheirforeigncounterparts!

Buttherearealsosomeothermoreexotictypestoconsider

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Chapter2:TwoSpecialTypesofDividendStocks

Beyondthebasicdomesticandforeigndividendpayingcompaniesyourealreadyfamiliarwith,therearealsootherinterestingtypesofdividendsharesthatareoffmostradarscreens.Andsomeofthesehaveattractivefeaturesthatmakethemequallyattractiveinanincomeportfolio.

Inthischapterwellcovertwoofthem,startingwith

RealEstateInvestmentTrusts

Inshort,thesecorporationsinvestinrealestateandmust,bylaw,distributeatleast90%oftheirincometoinvestorsintheformofbigdividends.Inexchange,theyarenottaxedatthecorporatelevel.

MostREITsown,operate,andmanagepropertiesthoughsomeareengagedstrictlyinthefinancingsideofthebusiness.Forexample,AnnalyCapitalManagementownspoolsofmortgagesratherthanproperties.

Howcanthatbe?Well,accordingtoU.S.law,atleast95%ofaREITsincomemustcomefromdividends,interestandpropertyincome.Andatleast75%ofitstotalinvestmentassetsmustbeinrealestate.AndREITscanalsoderive75%ormoreoftheirgrossincomefromrentsORmortgageinterest.

ThetypeofpropertiesownedvariesdependingontheREIT.Somepopularareasoffocus:

Officebuildings Apartments Shoppingmalls Storagefacilities

AlotofREITShavebeenonarollercoasterbecauseoftherealestateboom,bust,andsubsequentstockmarketrecovery.Somearehighlysensitivetochangesininterestrates,too.

Inmyview,thatmeansyouhavetobeveryselectivewhenaddingREITStoyourincomeportfoliorightnow.Differenttypesofpropertiesthriveduringdifferentpointsduringaneconomiccycleandyieldscanvarydrasticallyassharepricesmoveupanddown.

ThegoodnewsisthatcarefullychosenREITSareagreatwaytogetadditionalincomeANDtheyaddverynicediversificationintheprocess!

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Ofcourse,theresanotherevenlesswellknowntypeofdividendstockthatIlikeevenbetterthanREITs

BusinessDevelopmentCompanies

Thisspecialtypeofcompanyhelpssmallbusinessesandstartupsgetthefinancingtheyneedtogrow.

AndlikeREITs,theyregrantedspecialtaxtreatmentaslongastheydistributeatleast90%oftheirincometoinvestors.

BDCsareaverysmallniche,witharelativelyshortlistofpubliclytradedcompaniesavailable.ButIdotypicallyrecommendatleastoneatanygiventime.YoullseemycurrentpicksinyourregularIncomeSuperstarsissues.

FornowjustrememberthatBDCsarenaturallytiedtocapitalmarketsandperiodsofgrowth.Infact,onewaytolookatthemisasiftheyredividendgushingfundsofhighgrowthcompanies(manyofwhichcannotbeinvestedinanyotherway).

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Chapter3:APreferredSharePrimer

Wheninvestorstalkaboutpurchasingdividendstocks,theyalmostalwaysmeancommonsharesofacompany.Butthereisatleastoneotherclassofstockthatislargelyignoredpreferredshares.

Asthenamesuggests,preferredstockgivesitsowneraleguponcommonshareholders,especiallywhenitcomestodividends.Preferredshareholdersmayreceivelargerpayments,andcompaniesarerequiredtopaythesedividendsbeforedistributionsaremadetocommonshareholders.Notethatthisdoesntmeanthedividendisguaranteed.Itsimplymeansthatwhenitcomesdowntothewire,preferreddividendsaregoinginthemailbeforecommondividends.

Shouldthingsgetreallybad,preferredstockholdersalsogettopickthecarcassbeforecommonshareholders.Ofcourse,UncleSam,securedcreditors,andbondholdersareevenfurtherupthelinesotheremaynotbeanythingleftanyway.

Thedividendpaymentsonpreferredscanbefixed,adjustable,ordeterminedbyperiodicauctions.Somearecumulative,whichmeansacompanymustaddanymisseddividendstofuturepaymentsduringthetimethestockisheld.

Ifitsstartingtosoundlikepreferredsharesarelikethelovechildrenofcommonstocksandcorporatebonds,thatsbecausetheyare.

Now,somecriticsarguethatpreferredsactuallygiveinvestorstheworstofbothworldslimitedparticipationingrowthofearningsanddividendswithfewerrightsthanbondholders.

However,savvyinvestorslikeWarrenBuffetthaveusedthemwithgreatresults,andtheresnoreasonyoucantdothesame.Ifyousnooparoundthemarketforpreferredshares,youllquicklydiscoverthatHUGEyieldsarecommonplace.

Justoneproblem:Manyofthepreferredstocksoutthereroughly80%,infactareissuedbyfinancialcompanies.Youmightnotliketheideaofinvestinginthesecompaniesrightnow,especiallysincesomanyarestillstrugglingwithfinancialcrisishangovers.

Inshort,Iwouldabsolutelynotrecommendinvestinginindividualpreferredshareswithoutaverystrongunderstandingofwhatyouregettinginto.

Caseinpoint:Duringtheheightofthefinancialcrisis,Istartedtalkingtooneofmyneighbors.Whentheconversationturnedtothemarkets,IlearnedthatthisguyusedtobetheheadofNorthAmericanfixedincomeoperationsforamajorEuropeaninvestmentbank.Clearlysomeonewhounderstoodfinance,markets,andrisk,right?Well,thenheproceededtotellmehowhedbeenbettingheavilyonpreferredfinancialsharesinhisownportfolioandlosingmoneyhandoverfist.

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Ineverdidseehimagainbeforewemovedoutoftheneighborhood.Butsincemanypreferredstockslost60%,70%or80%duringtheworstofthedowndraft,Icanonlyguessthatsomeofhisholdingsgotkilled.

Inaddition,therecanbemultipleclassesofwhatappeartobethesameshares.Yieldsarenotalwayswritteninstone.Tickersymbolsandnamingconventionsgetconfusing.Thelistofpitfallsgoesonandon.

Fortunately,ifIeverrecommendanindividualpreferredshareinIncomeSuperstars,Illdothehomeworkforyou.

Andifyouwanttopursuepreferredsharesonyourown,youhaveanotheroptionavailablemutualfundsandexchangetradedfundsthatspecializeinpreferreds.

Conclusion:YourNextStepTowardInevitableWealth!

IhopethisguidegaveyouasolidintroductiontodividendstockswhichIllberecommendingquiteofteninyourregularIncomeSuperstarsissues.Ifsomeofthisseemsoverwhelming,dontworry.ImgoingtobetherewithyoueverystepofthewaytellingyouwhatspecificstocksIlikebestforthefutureandintroducingyoutoevenmoreuniquecategoriesofdividendstocksandotherincomeinvestmentsgoingforward.AndIwillalwaysdomybesttoexplainthingsinastraightforwardway,withveryspecificinstructionssoyoureneverleftwonderingwhattodo.Soletsrollupoursleevesandgettowork.Wevegotincometostartgenerating!

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Abouttheauthor:NilusMattiveistheeditorofIncomeSuperstars,amonthlypublication.

Previously,NilusworkedonWallStreetforvariousresearchfirms.HiscareerbeganatJonoSteinbergsIndividualInvestorGroup,wherehewrotearegularinvestmentcolumn.Later,Mr.MattivespentfiveyearsatStandard&Poorseditingthecompanysflagshipinvestmentnewsletter,TheOutlook.Duringthattime,Nilusalsowrotehisfirstfinancebook,TheStandard&PoorsGuidefortheNewInvestor.ItwaspublishedbyMcGrawHillin2003,andtranslatedintoChineseayearlater.

Nilusresearchandanalysishasappearedonanumberofinvestmentwebsites,includingBusinessWeek,DowJonesMarketWatchandFoxNews.Hefrequentlydiscussesdividends,incomeinvesting,andretirementmattersonpopularinvestmentshowssuchasTradersNation,InvestExpress,WallStreetShuffle,andMoneyMatters.