| Let’s put your capital to work collecting high-yield income and letting it compound to Mr. Olympia-sized proportions. We employ two strategies to achieve our goal: distribution growth and distribution reinvesting. This enables us to employ a strategy I refer to as the “9th Wonder” of investing.
You can find 36 additional tips for generating big income in my free book:
Unlimited Income: Replace Your Salary and Thrive in Retirement
Click here to download it while it’s still free. You’re familiar with the 7 wonders – the Great Wall of China, the Taj Mahal, the Great Pyramid of Giza, etc. You may be familiar with the 8th wonder – Einstein’s supposed observation on compound interest: “Compound interest is the eighth wonder of the world. He who understands it earns it . . . he who doesn’t . . . pays it.” We climb a step higher with the “9th Wonder.” We start with a solid high-yield income investment. I have one for you. Reaves Utility Income Fund (NYSE: UTG) is a battle-tested closed-end fund (CEF). The fund’s assets are allocated to large public utility and telecom stocks – many of the lowest-risk stocks out there. If you dislike volatility, the Reaves fund might be for you. Its shares have historically been 25% less volatile than the overall market. Reaves shares were first floated in an initial public offering (IPO) in 2004 at $20 each. The starting annual distribution was $1.16 per share (paid monthly at $0.0967 per share) that first year. Reaves has increased its dividend many times since. The annual distribution has nearly doubled over the past 18 years to $2.28 per share. As the distribution goes, so goes the share price. Reaves’ distribution has trended higher over the years, and so has the share price. Reaves share price has tagged along with the distribution. Shares that traded at $20 in 2004 trade around $30 day. You could have bought five Reaves shares with a $100 investment in 2004. Your investment would be worth roughly $150 today. Your investment would show a 50% gain. A 50% gain is nothing to brag about over 18 years, until you factor in an important variable – the distributions. You would have also collected $33.60 in distributions for every Reaves share over the past 18 years. Your five shares would have generated $168 in total distributions. When you include the distributions with your capital gains, you’ll find your $100 investment is worth $318 today. Now, let’s apply the “9th Wonder.” You compounded your wealth by reinvesting the Reaves distributions into additional Reaves shares. The Reaves shares pay monthly distributions – a terrific wealth-compounding benefit. The more frequent the distributions, the more frequent the compounding, the more money you make. You started with $100.00 back in 2004 and your distribution has grown at a 3.7% average annual rate. Thanks to the “9th Wonder” effect of compounding after 18 years your $100.00 is worth $448.43 for a 348.43% return. Your average annual gain was 19.36%. The Reaves starting yield was 5.8% in 2004. It’s 7.6% today You buy five Reaves shares at $30 each today. You start with $150.00 and let’s assume the same 3.7% average annual distribution increase persists in the future. Here we are 18 years later, and your $150 is worth $1,034.42 for a 589.62% return. Your average annual gain would be 32.76%.
I call that “making out like a bandit.” Want to learn more income secrets that can multiply your income and wealth?
Simply click here now to reserve your free copy of my book:
Unlimited Income: Replace Your Salary and Thrive in Retirement. The beauty of the “9th Wonder” is that it requires no additional investment on your part. It’s about as close to set-it-and-forget as you can get in the investing world. (Full Disclosure: I own the Reaves Utility Fund. I use the strategy I’ve outlined for my own account.) Good Investing, Stephen Mauzy
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