Monday, May 27, 2024

The Simplest Way to Build Your Wealth

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Editor’s Note: It’s been a while since we’ve mentioned Chief Income Strategist Marc Lichtenfeld’s core investing system, the 10-11-12 System, here in Wealthy Retirement.

In case you aren’t familiar with it, I’m re-sharing this article from last year to help you get up to speed. (As you’ll find – or as you may already know – the system is aptly named!)

The 10-11-12 System underlies Marc’s entire investing philosophy. Keep reading below to learn more about what’s made Marc so successful over the years.

– James Ogletree, Managing Editor

Over the weekend, a friend told me his teenage daughter is getting interested in investing and asked for some basic advice.

A few hours later, another friend texted me, asking how he can “get rich with dividends.”

For people who have never invested, the markets can seem like a mysterious and intimidating force – one that can gobble up their money at any moment. But the fact is, investing doesn’t have to be complicated.

The secret to making money in the long term is extraordinarily simple…


When you invest and let your dividends and gains compound, the returns can be outstanding. To make it even simpler and easily digestible, I’ve created a strategy for selecting stocks in order to achieve excellent long-term results.

It’s called the 10-11-12 System.

The goal with the 10-11-12 System is to generate 11% yields within 10 years. If you’re reinvesting the dividends, we’re aiming for a 12% average annual total return over 10 years.

Twelve percent may not sound like much, but it more than triples your money in 10 years. And it grows your wealth by 10 times over 20 years.

A 12% average annual return beats the pants off the market and the overwhelming majority of professional money managers.

The 10-11-12 System focuses on investing in what I call Perpetual Dividend Raisers – companies that raise their dividends every year.

The strategy has three important components: dividend yield, dividend growth and time. To earn 11% yields and 12% average annual total returns, you need to invest in stocks with decent starting yields (usually 4% or higher) and strong dividend growth, and you need to stay invested for years.

The higher the starting yield, the lower the dividend growth can be (and vice versa).

I caution investors not to go for the highest yields they can find. Companies with high yields can be very risky. We’re aiming for quality companies that have long histories of raising their dividends every year and will very likely continue to do so.

Investors who collect their dividends in cash will receive a raise every year. And if the companies boost their dividends by a meaningful amount, that increase should keep up with or beat inflation. (As you probably know, every Wednesday in my Safety Net column, I evaluate the safety of a company’s dividend and walk you through how I arrived at my rating. Be sure to check it out if you haven’t already.)

Investors who don’t need the cash right away should reinvest their dividends so that their investment compounds. The dividends will buy more shares, which will generate more dividends, which will buy more shares and so on…

At some point in the future, if the investor then needs to collect the dividends instead of reinvesting, all of those additional shares that were purchased will result in a higher cash payout.

Additionally, a company that is raising its dividend every year most likely has strong cash flows and growing earnings, which will result in not only higher payouts to shareholders but an increasing stock price.

The numbers can get quite large.

Eleven years ago, when I launched The Oxford Income Letter, I recommended Texas Instruments (Nasdaq: TXN). We ended up selling the stock in October 2023 for a gain of 430%. A month later, I recommended RTX (NYSE: RTX), formerly known as Raytheon Technologies. It has returned 463%. That’s the power of investing in Perpetual Dividend Raisers.

It all comes down to this…

If you want to make good money in the market, own quality stocks of companies that raise their dividends every year. It doesn’t get much simpler than that.

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