Editor’s Be aware: It’s been some time since we’ve talked about Chief Revenue Strategist Marc Lichtenfeld’s core investing system, the 10-11-12 System, right here in Rich Retirement.
In case you aren’t conversant in it, I’m re-sharing this text from final 12 months that will help you rise up to hurry. (As you’ll discover – or as you might already know – the system is aptly named!)
The ten-11-12 System underlies Marc’s complete investing philosophy. Hold studying under to be taught extra about what’s made Marc so profitable over time.
– James Ogletree, Managing Editor
Over the weekend, a buddy advised me his teenage daughter is getting concerned about investing and requested for some fundamental recommendation.
A number of hours later, one other buddy texted me, asking how he can “get rich with dividends.”
For individuals who have by no means invested, the markets can look like a mysterious and intimidating power – one that may gobble up their cash at any second. However the truth is, investing doesn’t should be sophisticated.
The key to getting cash in the long run is very easy…
Compounding.
If you make investments and let your dividends and beneficial properties compound, the returns could be excellent. To make it even easier and simply digestible, I’ve created a technique for choosing shares as a way to obtain glorious long-term outcomes.
It’s known as the 10-11-12 System.
The objective with the 10-11-12 System is to generate 11% yields inside 10 years. In the event you’re reinvesting the dividends, we’re aiming for a 12% common annual complete return over 10 years.
Twelve p.c could not sound like a lot, but it surely greater than triples your cash in 10 years. And it grows your wealth by 10 occasions over 20 years.
A 12% common annual return beats the pants off the market and the overwhelming majority {of professional} cash managers.
The ten-11-12 System focuses on investing in what I name Perpetual Dividend Raisers – corporations that increase their dividends yearly.
The technique has three necessary elements: dividend yield, dividend progress and time. To earn 11% yields and 12% common annual complete returns, it is advisable spend money on shares with first rate beginning yields (normally 4% or increased) and robust dividend progress, and it is advisable keep invested for years.
The upper the beginning yield, the decrease the dividend progress could be (and vice versa).
I warning traders to not go for the very best yields they will discover. Firms with excessive yields could be very dangerous. We’re aiming for high quality corporations which have lengthy histories of elevating their dividends yearly and can very doubtless proceed to take action.
Buyers who accumulate their dividends in money will obtain a increase yearly. And if the businesses increase their dividends by a significant quantity, that improve ought to sustain with or beat inflation. (As you in all probability know, each Wednesday in my Safety Net column, I consider the protection of an organization’s dividend and stroll you thru how I arrived at my score. Make sure to test it out when you haven’t already.)
Buyers who don’t want the money straight away ought to reinvest their dividends in order that their funding compounds. The dividends will purchase extra shares, which can generate extra dividends, which can purchase extra shares and so forth…
In some unspecified time in the future sooner or later, if the investor then wants to gather the dividends as an alternative of reinvesting, all of these extra shares that have been bought will end in the next money payout.
Moreover, an organization that’s elevating its dividend yearly most certainly has sturdy money flows and rising earnings, which can end in not solely increased payouts to shareholders however an rising inventory value.
The numbers can get fairly giant.
Eleven years in the past, after I launched The Oxford Revenue Letter, I really helpful Texas Devices (Nasdaq: TXN). We ended up promoting the inventory in October 2023 for a acquire of 430%. A month later, I really helpful RTX (NYSE: RTX), previously referred to as Raytheon Applied sciences. It has returned 463%. That’s the facility of investing in Perpetual Dividend Raisers.
All of it comes all the way down to this…
If you wish to make good cash out there, personal high quality shares of corporations that increase their dividends yearly. It doesn’t get a lot easier than that.