Investing in Dividends 102

Stocks you never have to worry about...

Written by Jimmy Mengel
Posted November 22, 2019

Last week, I gave you a rundown of the single most important investment you can make: dividend stocks.

Considering that I typically write about cannabis stocks, I’ll quote a Bob Marley deep cut here:

“In high tide or in low tide, I’ll be by your side.”

That is the mighty dividend stock. There is no decent stock portfolio in the world that is complete without dividends.

Much like a marriage, there isn't a stock out there that won't go through ups and downs: infighting, restructuring, splits, spin-offs, etc. But there are some stocks that you are better off sticking with “through good times and bad, through sickness and in health...”

While I’ve made a fortune on cannabis stocks, I still anchor my portfolio with long-term dividend stocks. They give me the ballast I need to feel confident about taking risks with other investments.

Today I’m going to show you my favorite two kinds of dividend stocks. These are “no-brainers” that I have in my own retirement portfolio…

Let me start with the royalty of dividend stocks...

Dividend Aristocrats are my single favorite income stocks… I firmly believe that one of the major indicators of a long-term stock pick is how long it’s been profitable enough to reward its shareholders with cash money. That’s right: checks delivered to your door every few months. There are hundreds of dividend stocks out there, but — for my money — the best of the bunch are the “dividend aristocrats”...

Why “aristocrats”? Well, Standard & Poor’s came up with the bizarre throwback name to set apart certain companies. The term “aristocrat” connotes the highest order of social class — see any hoity-toity gentlemen who has baron, duke, lord, or earl attached to his name. When it comes to stocks, these are royalty.

Dividend aristocrats are any stocks that have raised their dividends each and every year for the past 25 years. In our Crow’s Nest portfolio, we have a couple that have done well enough to reward shareholders for the better part of a century. With a track record like that, I’m very comfortable recommending them for any retirement portfolio.

The S&P Dividend Aristocrats Index has beat the overall S&P 500 over the past decade. Dividend Aristocrats generated an annual return of over 12% in the past 10 years, crushing the market’s 8.5%.

Over that last decade, dividends accounted for a whopping 27% of the market’s total return, which goes to show you just how important they are to your bottom line.

Here is one of my personal favorites...


McCormick & Company (NYSE: MKC) provides flavorful products to the entire food industry, retail outlets, food manufacturers, and food service businesses.

It has around $4.4 billion in annual sales. Willoughby McCormick started the business with a staff of three in 1889 when he was 25 years old. The company has quietly raised its dividend over the past 94 years. That qualifies it as a dividend champion, in a big way.

When I was living in Baltimore County during college, I used to wake up to the incredible smells of the McCormick spice factory in Hunt Valley. Some days the air would be permeated with lemon pepper, paprika, or the classic Baltimore smell of Old Bay seasoning, perhaps the most underrated seasoning in America.

The largest portion of McCormick’s consumer business is spices, herbs, and seasonings. If you cook, you have some in your house.

It is a forever stock. You should own it.

Here are the details:

MCK 20 year


YIELD: 1.37%

PAYOUT DATES: April, July, October, December




Now on to my next favorite dividend sector...


The second kind of dividend stock I want to share with you is called a REIT — or a “Real Estate Investment Trust”

Have you ever been a landlord? I have, and I have to say — it stinks.

The calls in the middle of the night because the basement has flooded...

The weekend trips to fix a backyard fence…

The electrifying experience of shocking yourself while reinstalling a ceiling fan…

All of those things happened to me when I was renting out my old house. I could go on and on.

Despite all of the years of inconvenience of renting a property, there is one thing I do miss: plenty of extra cash coming my way. That’s why I suggest investing in a much easier, more fruitful, and stress-free way of creating income from rental spaces. And you won’t even have to leave your house...

REITs, if you are unfamiliar with them, utilize a unique company structure with massive tax advantages. A REIT is a company that owns and typically operates income-producing real estate. That means any space that produces rent and money for the owners.

The real estate can be anything from office and apartment buildings to warehouses and hospitals, shopping centers, malls, hotels — you get the picture. The whole idea is to give all investors the opportunity to invest in large-scale, diversified portfolios of income-producing real estate — not just the extremely wealthy who own the buildings.

To do this, REITs were designed with a structure similar to mutual funds and can be easily purchased like any other liquid securities. To qualify as a REIT, a company needs to meet these criteria:

• Invest at least 75% of its total assets in real estate

• Derive at least 75% of its gross income from rents from real property, interest on mortgages, financing real property, or from sales of real estate

• Pay at least 90% of its taxable income in the form of shareholder dividends each year

• Be an entity that is taxable as a corporation

• Be managed by a board of directors or trustees

• Have a minimum of 100 shareholders

It is a pretty simple formula and works out wonderfully for investors — especially investors who want some meaty checks coming to them every few months. That’s because REITs pay out massive dividends. Because they don’t have to pay income taxes on the dividends they shower investors with, the yields get pretty high — far more than you’d see from a typical blue chip stock.

They are also forced to pay out those dividends by law to maintain their status as a REIT in the first place. That makes for about as safe a dividend as you could imagine. Here’s a bit of history on REITs...

The first REITs were started in the 1960s. REITs were created by an act of Congress in 1960 that enabled large and small investors to enjoy the rental income from commercial properties. President Eisenhower signed them into law as part of the Cigar Excise Tax Extension.

There are two major categories for REITs: equity and mortgage. Equity REITs are those companies that actually manage properties. That includes office buildings, malls, hospitals… you name it. Equity REITs account for most of the sector.

Mortgage REITs are the second type, and are exactly what you’d expect. They loan money for other companies to other real estate owners to cover their acquisitions and make money by charging interest on those loans. It basically breaks down to owners or financiers.

Here’s one company that will have plenty of renters going forward...

The entire world is getting old.

In case you haven’t noticed firsthand, here are some shocking facts about our aging population...

Every year, over 3.6 million baby boomers are retiring. That’s 10,000 people every single day! The U.S. Census Bureau reports that by 2060, 92 million Americans (20% of the population) will be 65 or older.

70% of the disposable income in the U.S. is in their hands. They drive at least $7.1 trillion in annual economic activity. That’s around 46% of the entire U.S. economy. By 2032, this economic growth is expected to surpass $13.5 trillion. And that’s just in the United States.

That's where Healthpeak Properties, Inc. comes in...

Healthpeak Properties, Inc. (NYSE: HCP)

Healthpeak Properties, Inc. — formerly HCP — is a fund that invests in properties serving the health care industry including sectors of health care such as senior housing, life sciences, medical offices, and hospitals in the U.S. It is perhaps the most diversified of the health care REITs. Here is some quick background on its history...

Healthpeak Properties, Inc. was founded as a publicly traded company in 1985.

In 1999 it merged with American Health Properties, which was the largest transaction ever achieved in the health care REIT sector at the time. It made them the largest diversified health care REIT with $2.5 billion of assets under management.

In 2006, Healthpeak Properties, Inc. acquired CNL retirement properties for $5.3 billion, which doubled the size of the company.

In 2012, it acquired a senior housing portfolio of 129 communities for $1.7 billion from a joint venture between Emeritus and Blackstone.

In 2014, it completed another $1.9 billion of acquisitions, including a $1.2 billion joint venture with Brookdale.

It marked Healthpeak's first international real estate investment in the U.K. It should be noted that acquisitions like these is the name of the game for REITs. It’s pretty simple: the more properties you own, the more rent you pull in and the less space your competition can own.

Healthpeak has a couple unique advantages that make it a perfect candidate for a long-term investment. It was the first health care REIT selected to the S&P 500 index. For years, Healthpeak was the only REIT in the Dividend Aristocrats List — having increased its dividend for 31 consecutive years. Now, it did lose that distinction after a rough year in 2015, when it cut its dividend.

But today, it looks like a great investment…

hcp 20 year

Imagine turning $10,000 into $106,000 without even worrying about it. It's the ultimate set-it-and-forget-it stock.

Here are Healthpeak's stats:


YIELD: 3.9%

PAYOUT DATES: February, May, August, November



That is the power of dividends, especially when you reinvest them.

I urge you to start a dividend portfolio today. I even wrote an entire book about it, The Big Black Book of Income. My Black Book outlines each and every kind of dividend stock, and lays out 27 sources of guaranteed retirement income.

Oh yeah, and it's free.

If you're ready for a "forever portfolio," the deals — like the stocks inside — don't get much better than that.

Slow and steady income allows you to sail with the fast and furious without sinking your entire fleet.

Grab your copy today.


Jimmy Mengel

follow basic @mengeled on Twitter

Jimmy is a managing editor for Outsider Club and the investment director of the personal finance advisory, The Crow's Nest, and cannabis stocks advisory, The Marijuana Manifesto. For more on Jimmy, check out his editor's page.

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