This week I have been doing a bit more stock research than normal because I will have some fresh funds in the not too distant future, thanks to the proposed sale of my hotels.
Reading various pieces of business news, you realize the world is not an easy place, business is tough, things are changing so quickly. When I think of stocks, I am always trying to project 5, 10, 15, even 20 years out, and how the business will look then.
It is not as easy as it used to be. The pace of change seems to be accelerating. This was really brought home to me when I read an article in the New York Post (see article here). The article is about Nino Hervias, who used his life savings to purchase a yellow taxi medallion in New York City in 1991. I am sure that like me you have seen thousands of these yellow cabs while watching movies set in New York. This medallion was a license to riches as the number of taxis in New York was restricted to those holding the medallion. The value of the medallion increased every year, peaking at $1.3m in 2014. He thought he was rich. Hell, he was rich!
However, it has all gone wrong for him since then, the value of the medallion has plummeted, thanks to apps like Uber. He is now struggling to get passengers. His exact words in the article were “We are waking up in the middle of the night not knowing what our future is going to be.” Not a good place to be. I feel for him as who could have predicted the rise of Uber?
So how does this relate to the topic at hand. Well I think the one thing that does give me some comfort in this fast changing world is dividends. I would not get the same level of comfort from a salary (job), from sales commissions, from social security, from blogging income (if I had any) or any of the new or traditional ways we make our money.
I can think of several ways any of the above income sources may disappear. Robotics and outsourcing may steal your job, excessive government debt may put your social security in jeopardy, changing technology or fashions may threaten your blogging income, apps might threaten..anything. This is why I believe it has never been a better time to see yourself as a Dividend Tycoon.
Think of yourself as a business and stocks as being on your payroll, some of which have been paying ever increasing dividends for over 50 years. These employees will pitch up for work , despite what may be happening to you. Their only job is to send their dividends to your bank account every quarter, or a couple of times a year at least. The good ones are remarkably loyal, shrugging off political problems and recessions.
Being a Dividend Tycoon is perhaps the most diversified business possible. A portfolio of 12 stocks could cover several industries in several countries. I believe this is far safer than a job. Even a rental property may suddenly find itself in the wrong part of town, or a tenant who does not pay for 6 months.
Had Nino Hervias rather taken a job driving for someone else and simply invested his $118000 in Johnson & Johnson stock, he would not be in his current predicament. No, he would now have Johnson & Johnson stock worth over $1.8m, and a dividend stream of close to $50000 a year. I am using Johnson & Johnson as an example because it was hardly a yet to be discovered microcap. It had almost 50 years of dividend history and was a household name, you can read an article I wrote about Johnson & Johnson here. He would also not have to go out hustling for passengers on the streets of New York. He would be a free man.
So make it a priority to set some capital aside. If you have none, make some. Find some expenses to cut if necessary, read my article The Millionaire Minute, do surveys for extra income, drive an Uber cab on weekends (please just dont tell Nino Hervias I told you that!), but just get yourself some capital and get yourself some stocks, and then get yourself some dividends.
Alternatively, you may believe yourself immune from these changes, and perhaps you are. The bonus though is that if you become a Dividend Tycoon, your life will get better anyway. There will be more income for unexpected expenses, to pay for a child’s education, to buy some new clothes, to visit New York.. and should you take an Uber cab, and the driver is rude as some are made out to be, smile and ask them what they think of driverless cars..and then suggest they visit ww.dividendtycoon.com..