Dividend Sensei, Featured Article

The Secret To Getting Rich On Wall Street

Adam Galas

13 postsFebruary 13, 2021

We all want to get rich on Wall Street – or at least reach our financial goals such as a comfortable retirement. That’s what Dividend Kings is determined to help you achieve.

We do that by recognizing broader trends and specific opportunities. For instance, despite everything, stocks are still the best-performing asset in history…

And cigarette-maker Altria (MO) is the second-best performing stock of the last 50 years. From 1969 to 2019, it’s offered investors 18.7% annual total returns, including dividends.

That adds up to a 519,060% total return, which means that every $1,000 invested became $519,070.

And today, it’s paying about $41,000 per year in dividends.

I cover this significant stock in more depth at Dividend Kings. But all put together, let’s just say it has a lot of valuable lessons for investors to learn…

The simplest of all being the critical concept of margin of safety.

The Secret to Success on Wall Street Is No Secret at All

Joel Greenblatt, who’s made 40% annual returns for 21 years now over at Gotham Capital, has said that, “Buying good businesses at bargain prices is the secret to making lots of money.”

That’s something the greatest investors in history have been preaching for decades, pointing to the easiest path to riches through:

Quality assets
Reasonable to attractive valuations
Sound risk management that lets you hold such stocks for the long-term, compounding your wealth in the process.

In which case, Altria is a perfect company to highlight the importance of margin of safety, otherwise known as discount to fair value.

To be sure, it didn’t make millions of investors filthy rich by going straight up. No company ever has.

Altria Peak Declines Since 1986

(Source: Portfolio Visualizer)

Even so, since 1986, Altria has delivered 17.3% annual total returns. Compare that to the S&P 500’s mere 10.8%.

And that’s despite Altria suffering four bear markets and numerous corrections along the way.

While digesting that information, you have to understand that, without dividends, its 50-year annual return drops to 10.5%. With them, however, it climbs to 18.7%.

That should show you the power of dividends. In fact, reinvesting dividends during downturns is exactly why Altria takes the title of second-best stock of all time.

It has compounded investor income and wealth at a remarkable pace despite a complex risk profile – which is precisely why it periodically suffers such large bear markets and corrections. For instance:

Cigarette volumes have fallen for over 50 consecutive years now
Regulations and taxes on tobacco keep going up
Few industries in the world are less popular due to their negative social consequences.

Yet all of that factors into Altria’s ability to make income investors so incredibly wealthy.

(Source: FAST Graphs, FactSet Research)

When it comes to actual company results, Altria has seen just one year of negative growth in the last 20 years (-2% in 2003). Its stock price, however, has fluctuated wildly based on headlines and shifting market sentiment.

For years at a time, it’s been undervalued relative to its historical 14x-16x price-to-earnings ratio.

Then again, for years at a time, it’s been overvalued, including in mid-2017, when it hit a P/E of 24x… making it 60% historically overvalued. So clearly, it’s been overvalued too.

At that specific time, it was in the biggest bubble in its history. This was created by record-low interest rates that created a “no alternatives” rally in so-called bond alternatives.

As such, MO peaked at a 3.1% yield compared to its historical 5% offering. It was priced as if nothing bad could ever happen to it again.

But of course, in the real world, something bad will always happen eventually.

Valuations themselves don’t generally trigger bear markets. Instead, some catalyst flips sentiment from greed to fear, leaving foolish investors and speculators typically paying the price for the outrageously dangerous prices they’d been buying into before.

And so the correction comes, sending once-adored stocks into the doghouse. The market is seldom rational in the short-term, to say the least.

That’s exactly what happened here, with Altria bottoming out at 6.6x earnings in March 2020. Investors were essentially so depressed, they were pricing it for -3.8% annual growth – forever.

Today, it’s still trading at a 33% discount to fair value, valuing it at 9.5x earnings. While that’s a bit better than before, it still means it’s priced for 0.5% growth – forever.

Yet analysts actually expect between 2%-6% growth over the long-term. And the bond market expects MO’s cash flows to continue growing steadily for the next 40 years – at least.
If they’re right about that, this stock is still trading near its best entry-point valuation in 12 years.

The bottom line is that Altria didn’t make investors crazy-rich by never suffering corrections or bear markets. It became the ultimate rich-retirement dividend-dream machine precisely because of its ability for dividends to compound during corrections and bear markets.

When margin of safety is highest, its probability of success is the greatest.

Today, Altria is the most undervalued dividend king on Wall Street. It’s also one my strongest high-yield blue-chip recommendations: one I’ve personally bought almost 40 times for my retirement portfolio in the last year.

I can’t tell you when Altria’s bear market will end, only that it will eventually if the company keeps growing as expected. At which point, prudent long-term investors buying it at the best valuations in 12 years will likely be thrilled with the results.

Happy Investing

Adam Galas

13 posts

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Adam Galas is a retired Army Medical Services Officer with an economics degree from the University of Minnesota who combines his 23 years of investing experience with a disciplined application of time-tested methods. Adam is holding or has held positions as a professional analyst at The Motley Fool, Seeking Alpha, and Simply Safe Dividends. His work has also appeared on thestreet.com, Forbes and Stocknews.com.

Due to his love of Buffett-style investing in safe, undervalued, dividend growth stocks, Tipranks recently ranked him Americas 43rd best analyst. And he is the second-most followed writer on Seeking Alpha, where as he is also a co-founder of Dividend Kings.

Thanks to a love of Buffett-style investing in safe, undervalued, dividend growth stocks, he was recently ranked the 43rd best analyst in the country by Tipranks and is the second-most followed writer on Seeking Alpha.

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

The Secret To Getting Rich On Wall Street

Adam Galas

13 postsFebruary 13, 2021

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