Article of the Week on ElderCareMatters.com: "What do most of us want more of?"

pbenedictPhilip C. Benedict, CFP
Benedict Financial Advisors, Inc.
Atlanta, Georgia  30328
770-671-8228

Member of the national ElderCare Matters Alliance

What would make most people happier? Better health? More friends? More time with children and grandchildren?

Most people of any age would like more of the above, but one thing that would definitely improve the financial and emotional quality of the lives of many people, especially seniors, is more monthly cash flow. Think about it.

If you have plenty of monthly cash flow you can hire people to do the things you can no longer do. If you have insufficient monthly cash flow you are dependent on family, friends and government programs.

I don’t know about you, but, I want to be able to control my own financial destiny as much as humanly possible.

The time to act to create a higher monthly cash flow isn’t when you are elderly, it is right now. Right now, no matter what your age. It isn’t when interest rates are higher, it isn’t when the stock market is higher, it isn’t when Congress finally does something right, it is RIGHT NOW.

Every person and every family that dreams of a retirement of leisure and a dignified ending needs to start creating their future monthly cash flow today.  

At the core of creating this future monthly cash flow is the strategy of investing in dividend paying common stocks of globally dominant companies. Of course everyone needs some savings in the bank and maybe some interest paying bonds, but it is getting comfortable with investing in dividend paying stocks and doing it that will potentially give you the cash flow you want during your retirement years.

What? You say owning common stocks are too risky to count on during retirement. Maybe that is because you are focused on the daily share price movements of the stocks rather than the cash flow the stocks are expected to generate. You have to learn to differentiate between the stock price and the underlying value of the operating company.

For a simple example, let’s take a look at a giant consumer products company’s actual history and see if we can focus on the company and not the stock.

Let’s look at the COMPANY over the last ten years:

  • Revenues have more than doubled
  • Dividends are almost three times higher
  • “Free Cash Flow” is over eight times higher

Let’s look at the STOCK:

  • It is currently selling for a little over $60 per share.
  • Eleven years ago the stock was selling for almost $60 per share.
  • Twice since January 2000 the share price has declined more than 40% in value.

This company has been very successful. Management has done about everything an owner (shareholder) could expect it to do. It has increased revenues, profits and the amount of benefits to the shareholder (dividends).

What can corporate management NOT control? It cannot control the share price, which is a function of the euphoria-and-panic of the financial marketplace.

If you are retired or planning to retire, your investment accounts are probably an important source of your retirement income. And, what do you really need in retirement? For most people it is the monthly cash-flow.

What has this company done for shareholder cash-flow (dividends) since 2000? It has more than tripled.

There are no guarantees in the world of investing but IF this company can triple it’s dividend over the next ten to twelve years, then the shareholder will be earning about 9% to 10% annually based on today’s investment. That will be a nice retirement cash-flow.

Own the company and not the stock.

I realize we can only own the “stock” of a publicly traded company, so it is more accurate to say FOCUS on the company and not the stock price.

But, you may be saying, “This country is in a giant mess and the mess seems to be getting worse every day.”

The original roots of this company go back to the year 1837. It has survived the war-between-the-states, two world wars, various terrorist attacks, and all sorts of natural disasters and the leadership of a lot of inept politicians over the years. It was able to prosper during the terrible inflation years of the late 1970’s and early 80’s. Today, most of its revenues are earned outside of this country, thus it is not overly dependent on the domestic economy.

However, despite this resilience, the share price of this company has declined in value rather dramatically many times during its history.  And we would expect the same in the future. Own the company and not the stock; it is the key to your financial contentment during your retirement years.

Even a great company can stumble, so you need to consider owning a group of stocks similar to the one above and enjoy the quarterly dividends. We believe no other asset class is likely to adapt to the rapidly changing and challenging world economic environment as well as these globally dominate international companies. They need to be a core part of almost every investor’s retirement income.

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