My mom raised me and my brother by herself, and she oftentimes worked two jobs during December so she could afford to put presents under the tree.
So, even if I needed a new pair of shoes, I wouldn’t tell my mother. I didn’t want her to work harder than she already was to provide for us. She would move heaven and earth to make sure we had what we needed even if it meant long days and sleepless nights.
Even years later as we prepare for Christmas, and my mother is asking me again what I want, I can’t help but respond: “Nothing Mom, I already have everything I want or need.”
She truly did give me everything I needed, including the work ethic that launched my career. I will always be grateful for her generous heart and incredible self-sacrifice.
Now, I am the father of five kids and a brand-new (7-month-old) grandkid. My older kids are out of the house and gainfully employed while my three younger kids are in high school.
These days the roles are reversed, and I am asking my teenagers what they want for Christmas.
Contrary to my own growing up, their Santa list seems to be growing much longer each year. Nothing like when I was a kid. All I can remember wanting was a Red Ryder BB gun, but God forbid, I would never tell my mother that.
As a result, this year, I am going to change things up. Today, I’ll not only share with you my real Christmas wish, but also my plan to fulfill my kids’ wish lists over the long term.
The Magical Gift of Dividends
Whether my kids know it or not, they do have everything they could possibly need and so much more.
And after a lot of thinking, I decided that this year, I’m going to break tradition and buy my kids stock.
I know this plan may likely go down like coal in Charlie Brown’s stocking, but I know that in the long run, my kids need to learn to be thankful as well as understand how to save money.
Dividend-paying stocks provide their shareholders with two return components: growth in capital and income.
The first factor to pay attention to is the capital appreciation component (growth) or the increase (or decrease) in the stock’s value over time.
The second is the dividend, or lack thereof, that the company pays to shareholders in cash, typically once a quarter.
The two added together equal the shareholders’ total return.
One important thing to remember is that when comparing two companies with equivalent rates of earnings—one paying a dividend and the other not paying—the dividend-paying company will pay its shareholder a higher total return.
The stock that pays a dividend to its shareholders is providing them a return bonus or kicker.
What Most Investors Pay Attention To & Miss Out On
Historically and for most investors, relying on steady dividends to provide a large-enough income has been a challenge.
For those investors seeking yield, the difficulty is in predicting the exact dividend policies companies will adopt in the coming years.
And as more investors enter retirement and need to replace substantial proportions of their working-years’ income by using their investment portfolios, a reliable dividend-yield strategy is a must.
Because real estate investment trusts (REITs) distribute (by law) at least 90% of their taxable income to shareholders annually in the form of dividends, investors are becoming increasingly attracted to the notion of balancing a portfolio with these steady and reliable dividend investments.
A company that qualifies as a REIT can deduct dividends paid to its shareholders from its corporate taxable income.
As a result, most REITs historically remit at least 100% of their taxable income to their shareholders and therefore owe no corporate tax.
REIT shareholders pay taxes on the dividends received and any capital gains. Most states honor this federal treatment and also do not require REITs to pay state income tax.
Like other businesses, but unlike partnerships, a REIT cannot pass any tax losses through to its investors.
All I Want For Christmas Are A Few Good REITs
That’s why all I want for Christmas are a few good REITs. And there are two great REITs trading at a discount now.
One is STAG Industrial (STAG), a solid industrial landlord with 563 buildings and over 111 million square feet of space spread across 41 states.
STAG has a history of paying and increasing dividends for over 11 years in a row and importantly, shares are currently discounted, which means you can buy them with a margin of safety.
Another stocking stuffer idea is Simon Property Group (SPG), a mall juggernaut with a portfolio of over 200 properties primarily here in the U.S.
Its strong portfolio is mostly made up of Class A Malls – which means it produces some of the best results for tenants when it comes to retail sales per square foot.
These shares are also currently trading at a discount, in addition to having a tasty 6.1% dividend yield as of the time of writing this. The upside looks appealing and our research targets shares to return over 20% in 12 months.
I can’t wait to see the expression on my three teenagers faces when I tell them they are getting stock for Christmas.
They may not be thrilled at first. But unlike the items they want that they’ll get bored of in a couple of months, REITs are one gift I know will keep giving in the years ahead.
I’ll be sure to remind them of a quote from one of the wealthiest investors of all-time:
“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” – John D. Rockefeller
I’ll let you know how it goes after the new year. I would love to hear from you about the financial lessons that you’ve tried to pass onto your kids over the years. Please share them, here.
In the meantime, have a wonderful Christmas with your friends and family this weekend. I hope you are surrounded by loved ones and blessings that last.
Happy SWAN (sleep well at night) investing,
Editor, Intelligent Income Daily