There are two ways to become exceedingly wealthy in this world: invent a revolutionary technology or own rights to someone else’s.
The greatest examples of this come from the world’s two wealthiest men: Bill Gates and Warren Buffett.
These two have made their billions in very different ways. Gates invented the means we’re using to write these words (Microsoft Word)…His software has netted him over $50 billion to date.
Buffett simply bought the rights to future earnings in everything from GEICO Insurance to Coca-Cola stock. He invested in these companies and their copyrights. Today, we’re going to go one step farther…
While we are going to recommend you buy shares of a company, we are really recommending you buy royalty rights to another’s invention.
The Long, Hard Fight for Your Income Rights
The history of royalty rights law is long and brutal. One of the earliest cases of royalty disputes took place in A.D. 561 between St. Finnian of Moville and St. Columba of Iona.
At the famous Clonard Abbey in Cluain Eraird, Ireland, St. Finnian lent his pupil Columba a psalter, or psalm book. Columba copied the book and a dispute over who had rights to that copy erupted, leading to the Battle of Cul Dreimhne, where more than 2,000 men were killed.
In recent history, a much less bloody royalty dispute broke out between Paul McCartney and Michael Jackson over rights to many Beatles’ songs. These rights are estimated to be worth as much as $500 million.
Battles like this — in all likelihood — will continue to be fought for centuries…the royalties due on pirated music being the most hotly contested copyright dispute these days.
The never-ending fights over royalties make it clear just how lucrative they can be.
The most profitable example that comes to mind is the song "Happy Birthday to You." Warner Music Group owns the rights to this song and collects around $2 million just from royalties every year.
Today, we have a less controversial — yet equally lucrative — opportunity for you…
The Oil Mine Royalty Play That You Can Buy Right Now…
Mesabi Trust (NYSE: MSB) is a $244 million royalty trust that holds interest in iron mines. Mesabi exists for one sole purpose — to collect income on the trust’s 1.5 billion mineable tons of iron ore reserves.
That has resulted in pretty sizable distributions to shareholders. The trust currently yields 11.9% annually — an amount that’s considerably higher than you would have netted in the broad market over the last several years time.
Mesabi’s stable yield has resulted in significant price appreciation in 2010. But that shouldn’t scare you away from shares. Remember, I’m advocating buying this royalty trust for the income it provides, and with an 11.9% yield right now, that income more than justified current share prices.
Keep in mind, royalty checks from small-cap dividends aren’t just the only way you could pocket some extra cash. Especially in this economic climate, it’s crucial to use whatever strategies you can.
Most people only think of one way to make money in the market: buy low and sell high. That’s just plain wrong.
Today, I’m going to double your chances of becoming a rich retiree using a two-fold attack on today’s insane market…
Graham’s Philosophy Could Double Your Chances at Early-Retirement Gains
A lot has changed in the last 40 years of investing.With today’s online brokers and instant internet market tracking, anyone can participate in the ebb and flow of the stock market.
Investors now have more opportunity to jump in the bond market and play fast-moving options.But nothing has changed more than the underlying philosophy many use to invest…
This Philosophy Could’ve Turned $100 into $3K While the Market Shrank
One of the greatest investors of all time, Benjamin Graham, noted in the 1973 fourth edition of his famed The Intelligent Investor:
"In the last 20 years the "profitable reinvestment" theory has been gaining ground. The better the past record of growth, the readier investors and speculators have become to accept a low-pay-out policy. So much is this true that in many cases of growth favorites the dividend rate — or even the absence of any dividend — has seemed to have virtually no effect on the market price."
Graham, who mentored the most successful investor you’ll probably ever hear of, Warren Buffett, knew a thing or two about investing. Here he is saying that a monstrous shift occurred in investment philosophy: instead of shareholders demanding their share of corporate profits through dividends, they became satisfied with expecting higher share prices.
Of course, this makes very little sense if you put the last decade into context. As of this writing, the S&P 500 is down 22.5% over that period, while the Dow dropped nearly 10%. That doesn’t sound like smart investing to me.
Meanwhile, certain companies do still pay shareholders their due. Take Terra Nitrogen (NYSE: TNH) for instance. This is a company I’ve noted before because of its aggressive take on shareholder value.
If you had invested a mere $100 this day 10 years ago, you’d have received $791.40 in dividend checks to date. With capital gains, you’d have turned a crisp $100 bill into nearly $3,000. A typical stock won’t yield these kinds of results.
So what makes Terra Nitrogen’s story so unique? First, it pays a large dividend, which would immediately turn off most stock speculators. But that doesn’t mean income investors would have bought TN back then…
You see, Terra Nitrogen — like hundreds of others out there — fall into a category of its own. It just doesn’t fit either investment philosophy… yet it fits both.
The Forgotten Ones
Speculators despise companies that pay dividends. Most would tell you that when a company cuts a check to its shareholders it is saying that they’re better off with cash than company stock. Seeing how one of the only groups of market gainers over the last decade were income investors, you can see the flaw with that argument.
Income investors, on the other hand, despise companies that are too small to offer bond-like dividend payments to shareholders. This group’s logic is that if a company doesn’t have Johnson & Johnson-like size and history, it isn’t capable of steady dividends. Terra Nitrogen proves this group wrong.
That’s why it’s important to look to the forgotten group: small-cap dividends. Many of these companies pay extraordinarily high dividend yields, while offering rapid growth only small, agile companies can.
