Why a “Promise” Is the Single Most Valuable Investment on Wall Street

Keith Fitz-Gerald Sep 14, 2016
11 

What if I told you about a stock that has returned 10X what Apple has since it went public, and still has that kind of profitability ahead of it?

Would you be interested?

Heck yeah – in a New York minute.

It all comes down to one simple “promise.”

How to Beat Apple-Like Returns 10-to-1

Millions of investors dream of finding the next “Apple,” and with good reason.

Every $10,000 invested on December 12, 1980 when the stock went public would be worth a staggering $374,000 today, according to BuyUpside.com

That’s great, but the stock I want to tell you about today has turned every $10,000 invested into $3.6 million over the same time frame. And, unlike Apple at the moment, it shows no sign of slowing down.

That’s a 10-to-1 “beat,” and an advantage that most investors would be foolish to pass up.

Yet, that’s exactly what will happen.

Most investors will, unbelievably, pass on companies like the one I am going to tell you about today because they’re “boring,” and about as exciting as watching paint dry. Or so they believe.

I can’t think of a costlier mistake for them, or a bigger opportunity for you.

Here’s the thing.

Most investors in today’s markets crave the monster returns they remember from the Dot.Bomb era when it was “normal” to hear about stocks doubling in days, if not hours. That’s a very dangerous preconceived notion regarding what it takes to make money because it limits their focus to simple price appreciation. In their rush to riches, most investors forget that there are two components needed for building truly legendary, earth-shattering Total Wealth: income and appreciation.

Two and Two Really Can Equal Five

Forget about price when you’re hunting for your next investment. Trading opportunities are different, so we’ll hold that discussion for another time.

Start with dividends.

Most people think about them as nothing more than yield when, in fact, they’re a promise from management that the company will achieve the results they say it will.

Now, I’ve used the word “promise” very deliberately, because that’s how I want you to think about dividends… as a promise. Not just cold hard cash.

Why?

For the simple reason that companies – just like people – that keep their promises are much more credible than those who don’t. The last thing you want to do right now with your money is invest it in a company that does not achieve what they say they’re going to.

Companies that have missed earnings in recent quarters have been punished severely, falling an average of 2.7% to nearly 6% in only two days according to FactSet. Companies that actually cut dividends have fared even worse in recent trading.

Pay particularly close attention to companies that have a long history of rewarding shareholders because that’s proof positive that management takes creating shareholder value seriously. Essentially, they promise results and deliver.

Consider using a site like Nasdaq.com, so you can clearly see just how much every continuing dividend streak, or “promise” has been worth over the years and, more importantly, how the markets have rewarded those who keep their word.

I think you’ll be stunned by what you find. Most investors who have never thought in these specific terms usually are.

To be very blunt, “promises” are worth a lot of money.

If you plunked $10,000 down on the S&P 500 in 1926 when it was created and thought only about price appreciation like many people do, you’d have roughly $1.65 million today after adjusting for inflation. But if you’d reinvested every kept “promise” over that same time frame (the dividends we’re talking about today) you’d have more than $30 million!

Many people tell me that they can’t afford to wait 90 years for results, and that’s fair. I can’t either. But that does not invalidate our discussion.

“Promises” matter. So prioritize companies that “keep” them.

Take Sherwin-Williams Co. (NYSE:SHW), for example.

Most people know it as a paint company based in Cleveland, Ohio that’s been producing some of the best paints money can buy since 1866.

What I wish they knew is that it’s also one of the strongest performing stocks of all time. Not to mention one of the most stable companies money can buy.

Why?

Because its management makes very specific promises and has a long history of keeping them.

Case in point, Sherwin Williams has increased its dividend growth rate from 12.6% over the past 10 fiscal years to more than 52% for the past two years, according to Dividend.com. What’s more, the company’s increased dividends every year for the past 37 years.

Furthermore, Sherwin Williams has a low 26% payout ratio which is “safer” than 97% of all other dividend paying companies in the market, according to SimpleSafeDividends.com. To put that in context, that’s such a low ratio that the company could slash earnings by 50% and still not have its payout ratio get out of line.

Think about this for a second.

Sherwin Williams’ management is achieving these results at a time when headlines would have you believe the investing environment pretty much stinks and that there is nothing to buy.

Watching paint dry doesn’t seem so boring now, does it?!

I “promise.”

Until next time,

Keith 

11 Responses to Why a “Promise” Is the Single Most Valuable Investment on Wall Street

  1. Brent Gile says:

    Hello Keith,

    As someone who is following the Money Map Method in the construction of my portfolio, I’m wondering, given my relatively small account, if it would be prudent to follow the unstoppable trends using etfs rather than picking individual stocks. This is how I’ve built my 50% base and I’m thinking this would provide better diversification until such a time as my account grows to a point where it’s reasonable to consider individual equity positions.

    I’m aware you cannot provide individual advice but am concerned as to whether or not I am building properly and if I’m on the right track.

    Regards,

    Brent Gile

    • Keith says:

      Hi Brent and thanks for asking.

      That’s a great question and an important one, too.

      What you’re doing is fabulous. Not only have you begun to build the base but you’re already thinking about next steps in a way that maximizes returns and minimizes risk. Both are key to the Total Wealth approach and to big profits down the line.

      Yes, ETFs are a great alternative until your capital has built up!

      Best regards and thanks for being a member of the Total Wealth Family, Keith 🙂

  2. John Eads says:

    I’m a relatively new participant in High Velocity. Which recommended trades would you suggest I start with ?

    • Keith says:

      Hi John and welcome to the High Velocity Family!

      It’s never a good idea to chase performance and the service is active enough that you won’t have to wait long for a “new” trade that will allow you to get started.

      In the meantime, don’t forget to take a few minutes to familiarize yourself with the subscriber’s only section of the service where you’ll find a whole bunch of resources that can help.

      Thanks for asking John.

      Best regards and thanks for being part of the Total Wealth Family (and, of course, High Velocity, too) – Keith 🙂

    • Jessica Sheppard says:

      Hi John, and thanks for reaching out! It’s great to hear about your decision to join High Velocity Profits. After joining, you should have received access to Keith’s Members-Only report, “Our First Two High Velocity Stocks.”

      It’s also available on the Premium High Velocity Profits website, but if you’re not able to access it, don’t hesitate to reach out to our Customer Service team: 1.888.384.8339

      We’re glad to have you here, and please feel free to contact us anytime!

      Jessica Sheppard
      Associate Editor

  3. richard i weisbrot says:

    Hi Keith,

    I dont see an option on e trade to put a trailing stop on a mutual fund position. Is it possible to do that?.

    • Keith says:

      Hello Richard.

      Unlike stocks and ETFs that trade throughout the day, orders to buy and sell mutual fund shares are completed at the day’s end when the fund’s Net Asset Value or NAV for short is calculated. That said, many brokerage firms do allow you to place an alert of the fund’s price drops to a predetermined level or by a predetermined amount. At that point, you could issue an order to sell (or buy) depending on what you’re trying to accomplish.

  4. Nawaz says:

    Hi Keith: I have been reading your articles, and I must say you are fabulous. I have been watching Ekso and have placed limit order till Nov. Hope it reaches my limit. Many thanks for your timely advice. I am also thinking of buying shw on Monday.

    • Keith says:

      Thank you Nawaz. You are extremely kind and I appreciate it very much.

      Sounds like you’ve got a good approach going and I particularly like the fact that you are very deliberately making decisions instead of throwing caution to the wind like to many investors.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  5. Daisy Lucente-See says:

    I have been reading your commentaries and they are very helpful. Got me interested in going back to the market.

    • Keith says:

      Hello Daisy and thank you very much for the kind words. You made my day!

      I will do everything I can to ensure that what I write remains interesting and compelling enough to keep you “in”. To that end, let me know if there are ever topics you’d like to see covered or that I can cover better.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

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