After my tour of duty in the U.S. Air Force during the Vietnam Era, I started my career with Touche Ross & Co. (now Deloitte Touche Tohmatsu Limited or Deloitte) in the St. Louis office over 47 years ago. At that time, Touche Ross & Co. was a “Big 8” international public accounting firm. Due to several disagreements with the Tax Partner in Charge, I ended up at Price Waterhouse (now PricewaterhouseCoopers, LLP or PWC) as a Tax Manager in the St. Louis office and spent about 3-years there until I decided I wanted to transfer to Tampa, Florida; that did not go well with the Partner in Charge, and he refused my transfer request.
By now, you are probably wondering what any of this has to do with a DRIP, whatever that is, and financial freedom. Please bear with me…
To continue my story, I had several good friends that stayed with Touche Ross in St. Louis, and one had just made partner; also, I knew that the obstinate Tax Partner in Charge had been sent away to Italy. Accordingly, I asked my friend if I could come back but, to the Tampa office; 24 hours later he called me back and set a meeting to interview with the Director of National Tax for the U.S., located in Newark, New Jersey, and if that went well, I’d be on a plane to Tampa to interview with the Tax Partner in Charge, who had also worked for Price Waterhouse in the Midwest.
To make a long story short, within 45 days we sold our house and were on our way to Tampa. Spent a year at Touche Ross in Tampa as a Senior Tax Manager until I received an offer from a client that I could not refuse; and ultimately ended up as a Senior Tax Manager with Peat Marwick (now Klynveld Peat Marwick Goerdeler or KPMG) in the Tampa office.
With all the mergers, the “Big 8” are now the “Big 4” and, over a 10-year period, I worked for three of the four as a Senior Tax Manager. The “Big 4” are the “most prestigious audit, tax, and professional service companies” with combined gross revenues of over $100 billion annually and they perform more than 80% of the public company audits in the United States. The “Big 4” also works with large privately held companies, non-profit groups, and high net worth individuals. Each Firm has about 100 offices in the United States alone, and offices in 150 countries worldwide. The tax departments are filled with lawyers, who cannot practice law in the U.S. but, in many countries they can and do.
As a result of my 10 years of experience with three of the “Big 4” in accounting, U.S. and international taxation, estate and asset protection planning, and financial and business planning, along with an additional 37 years in the same fields, I know what works and what doesn’t. Case in point: Sitting in a meeting with a client and the tax partner, I completed a review of a draft prospectus and the related projections for prospective investors, stating that the numbers made no sense, i.e., the prospective investors would put up all the money and, in the end, would most likely lose everything while large upfront fees and ongoing management fees would be paid from the investor funds. The client stated, “If the Broker makes money and the Syndicator [the client] makes money, two out of three ain’t bad.” That is what you can expect from Wall Street! We declined the engagement, but the scheme got done anyway by a small local accounting firm and its broker client.
In 2012, Ben Stein wrote a book entitled, How To Really Ruin Your Financial Life And Portfolio. Stein was enamored with Warren Buffet and his company Berkshire Hathaway (BRK), which became successful by investing in great businesses that pay dividends, but BRK has never paid a dividend to its stockholders! Stein concluded that the typical investor is better off investing in low-cost index funds and avoiding the advice of brokers, money managers, and Wall Street in general.
Although Stein mentioned the benefit of reinvesting dividends, it appeared to be an afterthought; he never mentioned that there are over 100 companies, U.S. Dividend Champions, that have paid and raised their annual dividends each, and every year for 25 or more years in a row. These Dividend Champions have continued to pay and raise their dividends through recessions, depressions, market declines, and wars.
Why would Stein not mention the Dividend Champions, which have dividend reinvestment programs (DRIPs)? Because Wall Street cannot make any money from them. Furthermore, the SEC, influenced by the powerbrokers on Wall Street, have forbidden these companies from advertising their programs; and, if the average investor stumbles across them, the companies are required to send them a huge prospectus—most likely requiring an attorney or an accountant or CPA to interpret—outlining the risks and none of the benefits of their programs. To conclude, Ben Stein probably did not know about DRIPs; otherwise, he would have been remiss by not including this information in his book.
Our DRIP Strategy can be implemented by YOU through a discount broker like E*TRADE. See our FREE newsletter, Issue 40, dated March 12, 2023, and go to Great Businesses to Buy Now. You may also want to read our book, The Best Kept Secret to Financial Freedom.
We encourage everyone to buy a DRIP a week or at least monthly. It doesn’t matter if you buy 10 shares or 100 or more shares at a time, just do it! If you follow our program, you can become financially independent within 10-to-15 years regardless of the direction of the market. You are buying an income stream or dividends that will ultimately replace your wages or self- employment income; you are not buying a stock at a price hoping that someone else will come along later and pay you more for it.
Here are a few suggestions to consider over the next few weeks:
1) Walgreens Boots Alliance Inc. (WBA) - $29.82 per share, yield = 6.40%
2) Enbridge Inc (ENB) - $35.66 per share, yield = 7.28%
3) Medtronic PLC (MDT) - $82.68 per share, yield = 3.35%
4) Bank OZK (OZK) - $35.85 per share, yield = 3.88%
5) Cisco Systems Inc (CSCO) - $50.26 per share, yield = 3.13%
6) Arbor Realty Trust Inc (ABR) - $12.57 per share, yield = 13.29%
7) Associated Banc-Corp (ASB) - $15.38 per share, yield = 5.40%
8) NextEra Energy Partners (NEP) - $59.14 per share, yield = 5.78%
9) AbbVie Inc (ABBV) - $136.47 per share, yield = 4.30%
These are all great businesses that we consider great buys with dividend yields above 3%. If you want additional choices, go to our Newsletter, Issue 40-2023, dated March 12, 2023; there are over 20 Great Businesses listed. Only purchase those DRIPs that have a current dividend yield of 3% or greater at the time of your purchase.
For those of you just getting started, before you enter a purchase order, you must make sure the dividend yield is 3% or greater. At E*TRADE, for instance, there is a “Search” bar on the top right of the screen when you access your account; just type in the symbol, e.g., WBA for Walgreens Boots Alliance Inc. It will take you to a screen with a lot of information, including the current price and the dividend yield. If the dividend yield is 3% or greater, go back and purchase the stock or DRIP. With other discount brokers, the “Search” bar may be located elsewhere, but you will be able to access the same information before you make a purchase.
Remember, you are buying an increasing income stream. Any drop in share price during your reinvestment period (10-to-15 years) is to YOUR benefit, i.e., you end up buying more shares, with your reinvested dividends, at less cost generating a faster growing income stream.
DRIP… DRIP… DRIP… All the way to financial freedom! Control your OWN future . . . Start investing for cash flow today! Before you know it, you will be financially independent. Think of all the possibilities you’ll have… you can walk away from your job, sleep till noon, travel the world, pursue your hobbies full-time, contribute your time to charitable endeavors… the skies the limit!
Dum Spiro Spero—While I breathe, I hope.
Slainte mhath,
Robert (Mike) G. Beard Jr., C.P.A., C.G.M.A., J.D., LL.M.