The Safest Income Stock in America
By Tom Dyson
September 06, 2007
In yesterday's column, I introduced you to a very special company called the Monthly Dividend Company.
No company has ever approached its dividend payments the way the Monthly Dividend Company does. Dividends are king at this company. Every decision management makes is determined by its effect on the dividend. Just take a look at the MDC's annual reports. You've never seen another annual report like these. They are filled with cartoons, diagrams, and easy-to-read explanations of the year's business performance. It's all designed to show shareholders the MDC's simple goal: stable dividend income.
I call the MDC's philosophy "total dividend dedication."
The Three Best
Gold Investments Right Now
Simply sign up to receive, DailyWealth, and we'll immediately e-mail you this latest research report...
Absolutely FREE:
|
|
|
|
The Monthly Dividend Company is in its 37th year of business. As of August 2007, the Monthly Dividend Company had paid 444 consecutive monthly dividends and 39 consecutive quarterly dividend increases. The annual dividend has grown from $0.90 in 1994 to $1.55 last month.
I write a newsletter dedicated to stocks that pay large dividends. It's named The 12% Letter. My readers need two things from the stocks I recommend: a worry-free place to park their savings and an income stream they can depend on. The MDC has both these attributes. It is the benchmark you should measure all your other income investments against.
Today, I present more evidence that this company is the safe, stable, reliable stock I've promised you it is. The stock is acting like a marble pillar in a city made of cardboard boxes. Over the last six weeks – while all other financial stocks went haywire – the MDC's stock price has risen!
As I explained yesterday, the MDC is in the sale-leaseback business. It buys property from convenience stores, gas stations, and fast-food restaurants. Retail chains don't want to own and operate property. They want to concentrate on their core businesses. Besides, property ownership ties up valuable capital that could be used for expansion. So the retailers sell their properties to the MDC and then lease them back through long-term contracts. The retail chains get a cash-injection to grow their businesses. The MDC gets the property and a 9% rental yield. That's it. It's a very simple model.
If you think about it, the MDC is a real-estate business and a banking business rolled into one. It lends money against real estate. It earns interest from tenants. It pays interest to Wall Street. It profits from the spread while holding a huge portfolio of commercial real estate...
Does this business sound familiar? To me, the Monthly Dividend Company looks a bit like a mortgage business.
One hundred forty-five mortgage and lending companies have gone broke this year. Even some of Wall Street's best-known banking and retail brands are getting clobbered... companies like Home Depot and Bear Stearns... for their exposure to real estate, liquidity, and mortgages.
Anyway, the point I'm trying to make is, the MDC is not a mortgage business, but its operations are based on credit, interest rates, liquidity... just like all those mortgage lenders, banks, and real-estate stocks out there. Its stock price should have got clobbered over the past six weeks.
Yet stock in the Monthly Dividend Company refused to decline. I recommended this stock in May at $28. It dipped below $24 in August, but is now back to $27, only 10% off its 52-week high set in February.
I already knew the MDC was a special company, run for the benefit of shareholders by the most responsible corporate management team I have ever seen. The stock's behavior in the last six weeks confirms this.
In sum, I believe the Monthly Dividend Company is the best quality income stock in America. The dividend is reliable. It yields 6% and always pays larger and larger dividends. The stock is a safe place to invest your most important funds: retirement savings. Even in the worst credit crisis in two decades, its stock price never wavered. The official name of the MDC is Realty Income Trust and it trades on the NYSE under the symbol "O."
If you're an income investor, I suggest you use this stock as a yardstick for all your income investments.
Good investing,
Tom
Editor's note: Tom Dyson is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
Sign up today to read more investment ideas from Tom Dyson.
| 
