Get a 13% Yield from a Stock Paying 7% | TopStockAnalysts.com

During the five-plus years we?ve worked together, Permanent Wealth Investor Editor Martin Hutchinson and I have established a little tradition.

You see, my friend ? a native of Britain and former global merchant banker ? has developed a real affinity for Maryland crab cakes. And there?s one place in particular that he likes to go ? a corner restaurant in the same neighborhood as our offices.

So each time Martin travels from New York to Baltimore for a strategy session with all the editors here, he and I slip away at lunchtime for two crab cake-platters ? and a couple hours of conversation.

I always spring for lunch ? and not just because Martin?s my guest.

Truth be told, I always feel like I?m getting the better end of the bargain.

I mean, where else can you sit down with a guy who?s fixed the economies of entire countries (not once or twice, but three times), worked on Wall Street and Fleet Street, and predicted global meltdowns ? for the price of a couple of crab cakes?

And since I share so much of what I learn with you, it?s almost like you?re right there with us.

The Unseen Power of Dividends

During his most recent visit, for instance, Martin and I spent nearly two hours talking about income-investing strategies ? and about dividends.

By ?dividends,? I?m not referring to the ?buy-a-utility-and-put-it-away? mindset.

I?m talking about the ?unseen? power of dividends: The dividend-and-income-investing strategies that investors typically devote little thought to ? if they?re even aware of them at all.

?The problem, Bill, is that most investors regard dividends as some stodgy add-on strategy ? the stocks that you buy after you?ve stuffed your portfolio with Facebook, four penny stocks and Microsoft,? Martin explained. ?In reality, as an investor, a dividend strategy is the first thing you should be considering. Let me show you what I mean ??

Martin pulled a folded printout from his inside jacket pocket and laid it on the table. The paper was covered with a series of calculations.

That?s when he let me in on his secret.

?You see,? Martin told me, ?when individual investors look at dividend stocks, they tend to focus on the current yield, and perhaps even the payout ratio, which, as you know, is a way of determining whether a company can maintain its current dividend-payout.?

?Those are important, to be sure,? Martin continued, ?But they are only part of the story. If you can find a company that has a track record of dependability ? of consistently raising its dividend ? and can be expected to continue to raise its dividend ? well, my friend, you?ve bought yourself a ticket on the High-Profit/Low-Risk Express.?

How to Double Your Returns ? and Then Some

As an example, he pointed out the track record of a company called Omega Healthcare Investors Inc. (NYSE: OHI).

It?s a healthcare real-estate investment trust (REIT) with a focus on nursing homes that has raised its dividend in each of the last eight years, and by an average of 10.5%.

t also pays a nice 7.25% dividend yield.

As Martin explained, if OHI just simply repeats that performance over the next eight years the real yield on your original OHI shares will more than double.

In fact, even if you?re conservative and OHI only raises its annual dividend by 8% instead of 10.5% the yield still jumps to a hefty 13.48%. On the dividend alone, that will earn investors an 83.66% gain if OHI stays the course over the next eight years.

And that doesn?t even begin to take into account the gains in share price the company will make as the amount of the dividend climbs.

At a constant yield of 7%, that means OHI shares would jump to over $44.29 a share just eight years from now.

Today, the company trades around $23 a share. Taken together with the dividend yield, that means your total return could climb as high as 176% over eight years. Take a look at the math:

As you can see, Martin?s secret gives investors two ways to win: One with the hefty and growing dividend, the other through share price appreciation.

As these numbers demonstrate, this can be an incredibly powerful strategy. Yet it?s often overlooked.

?Most investors don?t want to bother with it ? they think dividends are boring,? Martin said with rueful shake of his head. ?Shrewd investors, though, understand that this is not only a powerful profit formula ? it?s also one of the lowest-risk stock-market strategies you?ll find.?

He?s right about risk: Research has repeatedly demonstrated that high-yielding dividend stocks tend to suffer the smallest declines during market pullbacks; and they tend to recover faster than the rest of the market when they do fall.

?WILLIAM PATALON IIISource: Money Morning

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Source: http://www.topstockanalysts.com/index.php/2012/10/08/get-a-13-yield-from-a-stock-paying-7/

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