Make sure you get paid.

The massive bull market of 1982-1999 changed the investment landscape dramatically, making growth investors out of everyone new to investing. Thanks to discount brokerages like E*trade and Ameritrade, investing was more accessible than ever before.

Throw in the creation of 401(k)s and other investment focused retirement plans and you’ve got a genuine investing boom. Between 1983 and 1999, the percentage of US households involved in the market jumped from 19% to 49%.

Amidst all the hubbub, dividends and income plays became unfashionable. With stock prices soaring to new highs almost every day in the late ‘90s, investors wanted growth, not boring payouts. And we all know how well this philosophy performed during the Tech Crash.

One of the most quoted statistics regarding the stock market is the view that stocks have returned average annual gains of 10% since 1926. Far less quoted is the fact that nearly half of these gains came from dividends.

Dividends’ contributions to overall gains increased even more during the latter half of the 20th century. If you invested $1,000 in the stock market in 1960, it would be worth $114,000 by April 2008. However, if you remove the dividends, that same $1,000 would have only grown to $24,000.

Since most investors fail even to match the market’s performance, anyone interested in generating real wealth from investing needs to have some income plays in his or her portfolio.

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Global Investing: the Secure Path to Maximize Your Wealth

The US is no longer the best place for your money.

Between a volatile stock market, busted housing market, and crumbling dollar, the US’s reign as THE market of choice has ended. Consider the following:

Not once in the last 27 years has the U.S. been the top performer for world markets. From 2002 to 2006 alone, a time when the U.S. returned 60%, it finished 23rd out of 25 world markets.

If you’re not putting some of your portfolio in international markets, you’re missing out.

To read more, click here.

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Figuring out whether or not a company’s share price will rise always entails a degree of uncertainty. Dividends, on the other hand, offer investors steady, predictable payments. In this regard, they offer a degree of certainty that is uncommon in the markets. And in a climate like today’s, having some extra income to buffer against capital losses is a great strategy to employ.

Several investments are actually designed for large payouts. The most obvious examples are Real Estate Investment Trusts (REITs). REITs typically own large amounts of property, using the rental yields to pay out large dividends to their shareholders. In fact, as long as the REIT pays out 90% of its earnings to shareholders, it pays little if any corporate income taxes.

However, I’m a little wary of REITs right now because they’re so closely associated with the housing situation. There are likely some real gems amidst the rabble, but I’m not overly keen to rush in and catch a falling knife.

Master Limited Partnerships (MLPs) on the other hand, are a whole other story. Like REITs, MLPs pay next to nothing in corporate taxes provided they pay out 90% of their income to shareholders. However, they’re primarily involved in energy, not real estate.

If you’ve never heard of an MLP before, it’s not surprising. There are less than 100 publicly traded MLPs in the US. However, these little know business entities produce some of the largest payouts available to everyday investors.

MLPs are typically midstream energy companies. That is, they don’t produce or own oil or natural gas. Instead, they usually own the assets involved in bringing oil or natural gas to market— processing plants, fractionation plants, and pipelines. Put another way, they own everything in the production chain… except the actual oil or natural gas.

They’re the ultimate middlemen. And energy producers love them because they save the producers from having to invest the billions necessary to maintain these facilities themselves. Best of all, energy companies HAVE to use their services to bring their products to market. So even if the price of oil or natural gas plunges, these companies will still have business.

The five largest MLPs in the US are:

If you’re looking for some extra income to buffer your portfolio, these are a good place to start. In particular, the large cap plays are more stable both in terms of share price and dividend pay-outs.

Last 5 posts by Graham Summers

• We're Soooooooo Close! - October 9th, 2009
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• The One Investment That Might Be About to Bottom - September 30th, 2009
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