The Lazy Man's Guide to Riches

There’s a secret that both lazy and wise men tap to build wealth.

Its power has been hailed by geniuses and harnessed by novices. And it’s something every person reading this should fawn - not yawn - over.

I’m talking about compounding.

Albert Einstein stated, “Compounding [interest] is the eighth wonder of the world. He who understands it earns it. He who doesn't pays it."

He called it one of the greatest miracles known to man.

Baron Rothschild agreed, "I don't know what the seven wonders of the world are, but I know the eighth - compound interest."

It’s no coincidence that some of the most successful and wealthiest investors of all time have spent their careers hyper-focused on dividends and exploiting the power of compounding.

Their faces are carved on the Mount Rushmore of investing: John Templeton… Benjamin Graham… Warren Buffett…

Because time combined with interest – or dividends – can transform a small sum into a vast fortune.

That’s the perfect recipe for success for those investors who want to do as little work as possible, while at the same time being able to embrace every downturn as a victory.

The King of Fast Food Income

Building a successful portfolio is much like building a house.

To start, you need a solid foundation. One that can weather any storm Mother Nature throws its way.

Dividend stocks provide that for portfolios… particularly when using compounding correctly.

You see, dividend-paying stocks are one of the most powerful investments you can own. But to harness and tap their true potential, you need time.

And the more time you have, the higher your returns you’ll achieve. The stronger your foundation will become.

For example, let’s consider McDonalds (MCD).

Everyone knows McDonalds. And practically everyone on the planet has eaten there. Now, maybe you’re one of those people who smugly states, “I haven’t eaten fast food in five years…” Well, you know what? No one cares…

But that doesn’t mean you have to think of McDonald’s as an “outdated” or “un-tasty” investment.

Maybe someday we’ll get lucky, and McDonald’s will enter the telecom sector and start putting smartphones in Big Macs or enable you to log into your Facebook or X account on the back of a large fry.

But let’s be real… the company sells burgers and fries. And that’s alright.

It may seem boring, but that’s precisely what the lazy and wise investor wants.

Because here’s where it gets interesting… McDonalds has been paying a dividend since 1976 – longer than I’ve been on this particular planet.

The current payout is $6.68 per year per share for a yield of 2.27%.

And it’s considered a member of the Dividend Aristocrats – an elite group of 68 stocks that have paid and raised their dividend for at least 25 years.

McDonald’s, though, is on the cusp of joining an even more elite group - the Dividend Kings. These are companies that have increased their dividend for 50 years or more…

Well, the Big Mac purveyor has raised its dividend for 49 consecutive years!

For dividend investors and income connoisseurs, it’s key to understand there’s a coveted hierarchy.

At the top are Dividend Kings and Aristocrats. But these are followed by:

• Dividend Champions - companies that have increased their dividends for 25 years or more... but aren’t necessarily components of the S&P 500.

• Dividend Contenders - stocks that have increased their dividend for the past 10 years.

• Dividend Challengers - companies that have increased their dividend for the last five to nine years.

These are badges of honor.

Companies want to be promoted to the next echelon. And if they don’t, shareholders will jump ship. This is why there’s an 80% chance each year a Dividend Champion will increase its payout. Meanwhile, Dividend Aristocrats have a 90% chance of raising their dividend each year.

So, investing in them isn’t like buying a lottery ticket. It’s like buying a priceless piece of art that will increase in value over time.

And this offers an unparalleled opportunity on Wall Street…

Living Free on Happy Meals

John D. Rockefeller said, “Do you know the only thing that gives me pleasure? To see my dividends coming in.”

And he’s right… this is one of life’s great joys. Though, in the early years it's more akin to watching paint dry. But time – and compounding – create wealth and excitement.

For instance, let’s say on January 1, 2008, we invested $10,000 in McDonald’s. At a price of $59.83, we buy 167 shares.

Well, today, those shares would be worth $48,919.31.

That’s simple share price appreciation. A gain of 389% over 17 years. Not too shabby.

Plus, we amassed a total of $10,809.10 in dividend payments. And we’re currently receiving $278.89 per quarter in dividends. ($1.67 x 167 shares)

But watch what happens when we tap the power of compounding. We’re going to do that with a dividend reinvestment program (DRIP). This takes all the dividends we’re paid each quarter and automatically reinvests them, buying more shares… which means more dividends… which means more shares… etc.

Using a DRIP, that same $10,000 invested in McDonald’s on January 1, 2008, would be worth 78,334.11 today.

That’s a gain of 683.3%!

And we no longer own 167 shares. The number has grown to 267.4 thanks to the DRIP.

That means, each quarter we’re receiving $444.05 in dividends, which is being transformed into 1.7 new shares… which leads to more dividends…

But let’s add another 10 years. Let’s say, instead of January 1, 2008, we put $10,000 into McDonald’s on January 1, 1998, at $23.94.

Today – without reinvesting the dividends – that $10,000 would be worth $245,120.94!

That’s a fantastic return.

But we left an insane amount of money on the table.

You see, using a DRIP, that same $10,000 invested in McDonald’s on January 1, 1998, would be worth $452,345.74 today!

That’s a return of 4,423.5%!

That $10,000 grew to a sum that will practically pay for a retirement.

Plus, you would now own 1,539 shares of McDonald’s that are paying you $2,570.13 per quarter. That’s essentially 10 new shares being added to your portfolio each quarter.

And what was the fancy, secret trading strategy you employed?

Nothing.

You did absolutely nothing except turn on that DRIP. You didn’t worry about selloffs or corrections. You didn’t worry about bear markets or recessions.

McDonald’s isn’t going anywhere.

Better yet, every time shares dipped, your dividend yield increased and your DRIP went further.

This is why I preach dividend stocks must be the foundation of every portfolio. Because dividend stocks coupled with time and compounding are unmatched in terms of success.

Dividend investing is the perfect strategy for both the lazy and the wise man on their road to riches. All that’s required is time and patience… and the desire to do as little work as possible.

Lovin’ it,
Matthew