Readers, I’m going to walk through an unusual and surprisingly easy way to get companies to pay for your consumer products purchases.
Yep, you read that right. You can arrange it so companies will literally pay you to buy their products. I’m 100% serious. Here’s how:
Let’s take Unilever Corporation as an example. Unilever is a diversified producer of consumer products, including soaps, shampoos, skin lotions, and a wide range of food products including everything from Klondike Bars to Ben & Jerry’s ice cream to Lipton Tea, Knorr soups and bouillon cubes.
If I were to think about all the soap, shampoo, skin lotion (even the bouillon cubes and Klondike Bars!) that Laura and I buy over the course of a typical year, I’d guess it would add up to about $200-$250 a year. And I’m probably stretching it to even get that high.
Well, conveniently, Unilever’s stock [ticker: UL] pays a relatively generous dividend. The current payment is 35c per share every three months, or about $1.40 per year, and the dividend yield on the stock as I write this post is about 3.4%.
Which means: if you invested in 100 shares of UL, you’d collect dividends of about $140 a year. Buy 200 shares and you'll collect $280 a year.
Wham. The dividends from a 200 share investment in Unilever stock more than covers my entire annual expenses of all Unilever products. All of them!
Better still, this company’s dividend should grow at a rate equal to (or even slightly higher than) inflation, so this 200 share investment essentially innoculates my costs for Unilever products for forever. That's a really long time.
Kind of wild to think about things this way isn't it?
Even if you don’t have spare cash sitting around right now to make a 200 share investment all at once, you can easily build up this stock position over time at negligible cost. Just set up a commission-free dividend reinvestment plan (DRIP) directly with the company (see the company’s investor page), or slowly buy up shares using a low-cost discount brokerage firm like Fidelity or Schwab.
But this secret gets way, way better. After all, why stop with just food, soap and Klondike bars? Why not consider this idea in other areas where we spend our money?
How about your electric bill? Most likely your regional utility company has a stock you can buy--and most likely it offers a very generous yield too. If not, there are plenty of other dividend-paying utility stocks you can invest in. How hilarious would it be to have your electricity literally paid for by the same company that bills you?
How much do you spend on gasoline for your car per year? A lot, probably. Well, many oil stocks pay surprisingly generous dividends. Look them over and choose one.
Do you buy Neutrogena, Band-aids or baby powder? Consider Johnson and Johnson [ticker: JNJ]. Do you have a weakness for Jell-O or Planters Nuts? Buy Kraft Foods [KRFT]. If you’re actually foolish enough to buy branded boxed cereal, you can always self-fund these purchases using dividend-paying cereal stocks like Kellogg [K] or General Mills [GIS].
You can think about this idea as broadly as your creativity allows you to. Do spend money on prescription meds? Many pharma stocks pay juicy dividends. Do you like to eat out in restaurants? Plenty of restaurant industry stocks pay dividends too. Do you find yourself paying overdraft fees or other dumb bank fees? Investing in some dividend-paying bank stocks will ease that pain.
Do you pay rent? Why not select a dividend-paying apartment REIT? Do you have so much stuff that you need to pay for storage? Select a dividend-paying stock like PSA, EXR or SSS to self-fund your bill for that storage space. And so on.
Own these companies. Don't let them own you. And let them pay you to buy their stuff.
Readers, what do you think? And what ideas would you add?
Obligatory caveats to today's post:
1) It goes without saying that you should never put all your money into one stock.
2) Please, do not assume that a stock has some obligation to go up (or not go down) after you buy it. This is an act of supreme narcissism.
3) Companies can raise their dividends, but they can also cut them or (sometimes) even eliminate them. This is less common in the consumer products sector of the stock market, but it can happen.
4) Finally, stocks go down. Sometimes they go down a lot. In fact, all kinds of things can happen in the stock market, including huge, glorious selloffs. Be ready.
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