There is one way to consistently and reliably make a fortune in the stock market.

It has nothing to do with buying options or shorting stocks. You don’t have to time the market. And it doesn’t involve finding the “next big thing” or the latest technology. Without a doubt, history shows that the biggest and most reliable returns in the market come from the safest and most mature companies.

Specifically, the key is to buy the highest quality companies you can find – companies that pay dividends and have a history of raising those dividends over time. Buy these shares when they are cheap and reinvest the dividends. That’s it. The combination of rising dividend payments and reinvesting those dividends invokes the magic of compounding.

Let me show you what I mean. Market research firm, Ibbotson Associates, has calculated U.S. stock market returns going back more than a century. Their study shows that if you invested $1 in large U.S. companies in 1925, you would have had $98 in 2005. Had you reinvested the dividends, your $1 would have become $2,658.

The same $1 invested in 1824 would have become $374 in 2005… or more than $3,000,000 with dividends reinvested.

But by no means do you have to invest for a century or even a quarter of a century to capture the power of compounding reinvested, rising dividends.

Had you invested $10,000 in Johnson & Johnson in 1989, you would have purchased 126 shares. After splits and by reinvesting your rising dividends into more shares, you would have 2,868 shares today, worth $150,862. That is a return of 1,408%. And your initial investment would now provide you with more than $5,621 a year in dividends… the equivalent of a 56% annual yield on your initial investment!

This is how Warren Buffett’s original shares in Coca-Cola (purchased in 1988) now provide a yield of 32% on his original investment… the equivalent of several hundred million dollars per year.

Opportunity is Knocking…

With many of the best dividend-raising companies trading at a significant discount to their true value, there has rarely been a better time than NOW to build a portfolio of these stocks.

Companies that have a long history of raising their dividends are the strongest and most stable companies in the market. That means they not only provide the safest shelter in the storm, many of them actually benefit from a recession.

Companies can respond to a severe economic downturn in one of three ways. They can:

1. Die. Many companies have already declared bankruptcy and many more will before this downturn is over.
2. Survive. These are the companies that downsize, cut expenses, lower prices, close factories and stores, sell assets and cut dividends.
3. Grow. These companies may cut expenses and become leaner, but they also increase their market share by swallowing the minnows and beating up the weaklings. They fill in the competitive gaps that retreating companies have left behind.

Surviving is better than dying. But you want to invest in companies that can continue to grow and increase their competitive advantage.

While other companies play defense, protecting a diminishing pile of cash and by getting smaller and slashing assets. Other companies become bigger by buying assets (heavily discounted assets, at that). Recessions and downturns actually make these companies stronger.

As an investor, you shouldn’t fear a bad economy and a bear market. You should embrace them. If your retirement is more than a few years away, the crash in asset prices is not a crippling blow. It is a gift that comes along rarely. It takes bad times to push the price of great stocks down far enough to make huge returns over time.

And great stocks have rarely been as cheap as they are today.

If you have a time frame of 5 to 20 years and you’re looking for investments that can provide you with 1,000% to 10,000% gains, consider investing in companies like Wal-Mart, Proctor & Gamble, Verizon Communications and Emerson Electric.

Average into your positions over time, continue to invest, and then reinvest the dividends back into more shares. There is no more reliable way to become wealthy in the stock market.

Source: The Stock Market’s Greatest Secret

It will encourage technological development in environmental and other “future” industries. It will seek sources of energy other than the oil and gas we get from Mexico, Canada and OPEC. And it will put generous sums of money behind these initiatives.

The Obama government emphatically does not want banks to sit on the money they get from the government. Nor do they want it to go to shareholders in the form of dividend payments. This is why I look for more companies to cut their dividends and this plays perfectly into my Red Flag Insider strategy.

But wanting it and getting it are two different things. The financial crisis has spread to other countries, undermining economic growth everywhere and putting a dent into foreign exchange reserves. All the while, the printing presses of the world are working overtime. The draining of money from the global economy combined with the wanton printing of money has turned into a high-stakes battle.

The crisis continues unabated. The money drain is winning so far.  And here are four reasons why it’ll keep on winning…

1. Consumer, construction and commercial real estate loans are getting worse.
2. The U.S. economic crisis has turned into a global crisis. And now the global dimensions of the crisis is boomeranging back on the U.S. economy and aggravating our problems even further.
3. Some overseas economies have been hit hard. But many developing countries have not yet felt the full brunt of the global crisis. They will this year, making the crisis truly global.
4. The negative feedback cycle, as Warren Buffet calls it, is still playing out. Consumers have lost faith in the economy, buying less. Companies are laying off and cutting back, expecting consumers to buy less. And banks are increasingly fearful, lending less to both individuals and businesses.

This is worth watching. With so many sectors suffering, the ones that get government sustenance are operating at a competitive advantage.

Fair or not, it gives you a way to invest.

Source: Why the Bailout Won’t Work

This from Whiskey & Gunpowder:

There has never been a better time than right now to buy stocks. I know what you’re thinking — it sounds strange considering the enormous volatility in the market. But, I’m not talking about just any old stocks. I’m talking about stocks that produce real income.

In these manic times, you need to keep one important idea in mind when stock shopping: dividend yields. If there is one proven way to make money during any market condition, it is investing in companies that offer low, growing dividends. In fact, 97% of all gains in the S&P 500 over the last 80 years have come from reinvested dividends, according to one study.

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The Deficit Time Bomb

Well, Election Day has come and gone…and our deficits are still there…and growing…

Those deficits are going to wreak more havoc on the economy and individual savings than can be properly imagined.

We’re still offering solutions in our “Personal Bailout Bundle” and it’s still exclusive till Dec 21. Don’t miss out. Just click here to read more.

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If you are sitting on a huge pile of cash in a nice big home that you own outright, go ahead and reinvest your dividends. But if you worry about your bills, dream about helping your kids out more, or just wish you could eat dinner out a few times a week, those dividends can be the best solution.

Take a step back and analyze the situation. When you invest in a dividend-paying stock, you have the option to put those payments back into more stock or cash those checks to boost your lifestyle.

But there is a third option that most don’t even know about…

DRIPing Money into Your Retirement Savings

Many dividend-paying companies offer Dividend Reinvestment Plans, or DRIPs. These plans allow you to “set it and forget it.” Just buy some shares, set up the plan, and let the company do all the hard work. If all things go well, your money — and your stake in the company — will increase and be waiting for you when you retire.

Most investors, however, have no idea that they are allowed to split their investment. Instead of putting all of your shares in the DRIP, you can actually allocate some to pay you via dividend checks and others reinvested. That gives you both the spending power of dividends now and a savings element to work for you until you need it.

Think it can’t get any better? Well, many companies make their DRIPs even more enticing.

Certain companies allow you to both receive dividend checks in the mail and buy more shares for a discount. If you are enrolled in these companies’ DRIPs, your dividends will actually buy you up to 10% more stock every payment.

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The End of Cheap Oil

You wouldn’t think so. After all, oil prices just plummeted…

But the fundamentals are clear as day. Oil is destined to get a lot more expensive.

It’s going to change life in the U.S. and the world…forever…but you can protect yourself and prosper… Click here to take advantage of oil’s temporarily lower prices.

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Matched Gains Without Working a Day for the Company

Here’s how it works:

You want to invest in Company A. That company wants you to reinvest your dividends back into more shares. So, they offer — as a benefit for signing up for their DRIP — a market discount on every purchase. Company A will take your shares and sign you up for this plan. When the dividends come out, they’ll reinvest them by buying more shares for you at a 10% discount to the market price.

It’s as if the company was matching 10% of your investment just like an employer-based 401(k). Here’s the best part: Most companies will let you split your shares into half “pay now” and half “reinvest for later.” So you are collecting current income from half your dividends, while saving for your retirement through an employer-like “matched gains” program with the other half.

From your perspective, it’s exactly like working for the company without ever lifting a finger. You are basically treated as a long-term employee. Better yet, at the end of the day, you still own all of your shares. And shares of companies that offer consistent dividends and DRIPs typically increase in value over a few years. Even in this market.

And you can do this with as many different companies as you want.

There are already over 1,000 DRIPs, most of which allow you to split your shares, and a few hundred of these “matched gains” retirement plans. Many more are jumping on this bandwagon.

It benefits you by giving you current income as well as retirement savings, and it benefits them by stabilizing their share prices.

Who Cares What the Shares Cost?

Of course, you don’t have to do any of this. You can simply invest in a dividend payer and just take your paychecks for life. That’s fine. Either way, you’ll certainly ease your stresses and strains while the economy is floundering.

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Get Gold Cheap… Before It Takes Off Again

Gold is giving you another chance to get in for the inevitable ride up at a bargain.

Here’s how to get it at a discount and multiply those gains.

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Income investing gives you options like these that “buy low, sell high” strategies don’t. Perhaps most importantly, income investors benefit from a completely different outlook on the market. They are not worried about share prices. They don’t even mind when prices drop. It just allows them buy more stock.

The most important focus for these investors is the dividend. As long as a company pays its dividend, especially if it continues to grow, the investor is usually happy.

Investing like this is much easier than trying to time the market and worrying about the economy. It actually solves both problems. It gives you a two-pronged attack on today’s hectic market.

Source: The Best Secret Savings Account

More from Smart Profits Report:

Amid the market’s mess, many pundits have touted the benefits of dividend paying stocks.

While it’s true that dividends bring you a form of income, does it really put a floor under a stock? The argument is pretty simple. Many companies have products that are such an integral part of day-to-day life that they are…

1. Very unlikely to disappear.
2. They’ve built up balance sheets that are strong enough to survive a multi-year downturn.

So instead of high share price appreciation, they repay their shareholders by passing along the profits in the form of dividends.

However, as cash flows dry up, companies cannot always support their dividends and investors can suffer a second whammy as the dividend gets cut and the stock finds a new level at the same yield.

Here’s the way to do it…

Follow The Cash

You have to be tactical. Buying dividend stocks in this type of prolonged downturn does provide a good return if the stock remains stable. But if a cash flow shock occurs, dividends could suffer and the stocks that were supported at the beginning of the bear market substantially underperform later on.

You can avoid this trap by looking at the key driver of dividends – cash flow.

In the heat of a bear market, investors will always be concerned about how far top-line growth can drop, but good management teams can handle this by cutting expenses.

However, the fixed depreciation of hard assets that are stuck to the balance sheet can make profit look worse than cash flow. While profit may look bad in the short-term, I have never seen a company cut a dividend that was 50% of free cash flow (or less).

The bottom line is that as long as free cash flow holds up, the management team has options and the dividend will be safe.

The last thing a company with a historically stable dividend will do is cut its dividend, as it would entirely change the shareholder base by boxing out value investors that have a yield hurdle.

So when it comes to dividend-paying stocks, while revenue and earnings growth are obviously important, be more concerned with the money on the cash flow statement.

Source: Beware The Dividend Trap… Here’s The Most Important Number You Should Consider

OK, I am not a micro-investor; Nano sounds closer. Where is Cheniere likely to go? I look at this position like a pile of chips on the poker table. As long as they keep sending the dividends I am no worse. Long term I need that dividend income for my retirement hedge against inflation. I did see the comment from “Barrons.” I would like to know your opinion of Cheniere and its industry segment?

I love your blog. It is top-of-the-list of a group of blogs I read daily and is the one I like the most.

Wayne.

Dear Wayne,

I love MLPs because they typically pay out great dividends. In this case, Cheniere (CQP) is paying a 16% dividend. That’s not nearly enough for me to love them.

First of all, they aren’t making any money yet. Their future revenues will come from a 100% interest in the Sabine Pass gas terminal, which is 99% complete.

I call this risky because if construction is delayed or they get a hiccup during operation, their earnings will be affected immediately and you’ll see the stock take a hit. If earnings take a big hit and it affects their cash flow, then it’ll be hard for them to scrounge up enough money to continue paying that 16% dividend.

If they stop paying the dividend, the stock will fall faster than Fat Albert skydiving without a parachute.

To make matters worse, they barely have any cash (what they do have is restricted to pay off bonds), they have over two billion in debt, and their dividend history stretches only five quarters. Typically, we look for eight quarters of steady or increasing dividend payments.

Listen, if you’re looking at this as a gamble, then that’s exactly what you’ve gotten yourself into. This certainly wasn’t the safest income investment to get into.

As a gamble, this company should begin performing well once they have their gas terminal up and running. But for growth to continue, they will need to start acquiring or building more terminals and pipelines.

As an income investment, this company isn’t conservative enough. This is certainly no ride. But as a gamble, why not ride it? If they don’t begin appreciating after their gas terminal starts operation, then let it slide.

P.S. Want to see me cover a stock? Send an e-mail to feedback@investorsdailyedge.com

Source: Ride or Slide: Cheniere Energy Partners (CQP)