Dividend Stocks A Billionaire Loves
When it comes to investing in dividend stocks, it’s tough to ignore a billionaire.
Especially a billionaire who actually talked his kidnappers into setting him free.
That’s what Eddie Lampert did back in 2003.
It’s not easy to find Eddie’s office in Greenwich, Connecticut. There’s no sign, and visitors run into the kind of security you’d expect for a guy who’s worth a bundle… north of 3 billion.
So I can’t exactly stroll into Eddie’s office for a friendly chat. But I have been able to check out some of the dividend stocks he owns.
Fascinating stuff…
Starting with a couple of hundred thousand shares of IBM $IBM.
Even though IBM has been pounded, it still pays a 2.7% dividend, and the dividend has been growing for the past 15 years.
Eddie bought his IBM at an average share price of $169.98. You can buy it for less right now, so if you’ve ever wanted to get a better deal on something than a billionaire, here’s your chance.
But here’s something interesting to know about Eddie, besides the fact he has homes in Florida, Aspen, and Greenwich.
(Security is so tight at his $38 million spread in Indian Creek Island, Florida that his private security team circles the island in boats.
Eddie Lampert also has huge positions in stocks that DON’T pay dividends.
That’s because he’s made a massive bet on Sears $SHLD.
Along with running his hedge fund, ESL Investments, he’s the CEO of Sears, and owns a boatload of Sears stock.
So why does a guy like Eddie Lampert own a dividend stock like IBM?
Probably for the same reasons Warren Buffet does.
IBM is a great example of the two things you should look for when you’re checking out dividend stocks to buy.
Dividend Stocks Must Give You These 2 Things
The first thing you need is a track record of growing dividends.
Dividends that are growing are better for your portfolio than the highest dividend paying stocks.
That’s because a high yield is risky. Dividend growth is safer. Over the long haul, it’s how you’ll make more money.
Just ask Eddie Lampert and Warren Buffet.
And you can see why when you check out my article on Dividend Investing Breakthroughs.
Focus on dividend growth when you’re looking at dividend stocks to buy. But don’t demand perfection.
It’s not a perfect world. Even the most solid blue chip dividend paying stocks stumble.
IBM ran into trouble awhile back. It cut distributions by 80% in 1993.
After dividend growth, the second thing you want to look for is a common sense business.
Now we all have our own thoughts on what common sense means.
When it comes to investing in dividend paying stocks, I’m talking about a real business that has real customers and a real future.
The latest fad restaurant concept with zero franchisees isn’t a real business.
Neither is a real estate developer sitting on lots of highly leveraged land but nobody to buy the houses he wants to build on it.
Dividend Stocks Need A Yesterday And A Tomorrow
The yesterday is the track record of paying growing dividends.
The tomorrow is the solid prospect of more customers, more opportunities, and more revenue.
IBM clearly delivers on the yesterday. It doesn’t just give you a track record of paying growing dividends… it gives you a well-deserved reputation of one of the world’s best run companies.
The tomorrow… well, that’s another question, because it sold off its chip business and needs its hardware and cloud services to light things up.
Check out this chart, and you’ll see the ugly hit that IBM took in the fall of 2014.
That’s when IBM told investors that it was paying another company $1.5 billion to take its chip business off its hands…
Not what you want to see…
Unless you’re a patient, long-term dividend investor.
And you can’t help but think that billionaire investors like Eddie Lampert and Warren Buffet must feel good about IBM’s future.
If Buffet and Lampert figured IBM’s glory days were in the past, they would have bailed out.
So here’s what to do.
When you’re sizing up dividend stocks, don’t just keep your eyes glued to the rear view mirror.
As best you can, get a feel for the future of the business your company is in, and try to understand how the company will perform.
Eddie Lampert must believe in the future of IBM.
And he clearly believes in the future of Sears, a legendary retailer where sales have been on a downhill slide for years.
Even if you and I could slip past all the security and make it into Eddie Lampert’s office, we wouldn’t see a crystal ball on his desk.
And unless we got out in a hurry, here’s what we probably would see.
A member of Eddie’s private security team staring us down with an Uzi 9mm semi-automatic rifle.
Regards,
Michael Jennings
Dividend Stocks Research
Note: Michael Jennings writes and edits DividendStocksResearch.com. Sign up for our free dividend reports and dividend newsletter at http://www.dividendstocksresearch.com/free-sign-up. We’ll show you how to create regular income by investing in dividend stocks, easily, step-by-step.
Category: Dividend Stocks
