The Worlds Greatest Dividend

Stock

A Moneynews.com Special Report

by Bill Spetrino

7KH:RUOGV*UHDWHVW'LYLGHQG6WRFNSpecial Report

My name is Bill Spetrino, and Im here to tell you that you can !nd incredible investing success with high-dividend-yield stocks. How do I know? Because Ive done it myself.

But before I get to the stock that started it all for me the one thats still an incredible wealth-building machine today it may help to know a little more about me.

First, its worth noting that I didnt come into the world with a head start in the riches department. I was born to a family of ordinary means in the suburbs of Cleveland, Ohio. My dad was not a congressman like Warren Buffetts dad was, nor was he a banker, industrialist, or global businessman. Truly, no one in my family possessed any unique !nancial planning ability other than hard work and thrift.

Admittedly, I personally never enjoyed manual labor or, frankly, working for others. I always wanted to do my own thing.

I graduated from John Carroll University in University Heights, Ohio, with a degree in accounting. But a brief stint at Citigroup taught me one valuable lesson: I did not want to be part of corporate America.

So instead I bowed out and became a part-time instructor at a community college, where I worked for a decade while I started my own small business, buying and selling an eclectic mix of sports memorabilia, life insurance, vitamins, and golf balls.

The !rst six years forging my own way without a steady full-time paycheck were really hard, because all the money my wife and I made went toward making extra payments on our condo and covering our living expenses. Many friends and family members ridiculed our thrifty lifestyle, but pushing ahead undeterred, we were mortgage free within eight years.

Then, in 1990, my focus switched from sports memorabilia to providing corporate entertainment services, and my wife and I were able to start saving money to build our !nancial future, starting with just $9,000 of capital we had at the time. And, importantly, I discovered Wall Street, or more speci!cally, the incredible power of dividend-paying stocks.

Today, we have more than $1 million in the bank. And, quite literally, the money I earn from my regular dividend payments alone easily covers all of my familys living expenses.

In The Dividend Machine newsletter, which

was launched in 2009 when I was discovered by Christopher Ruddy and Newsmax, I have recommended a number of great dividend stocks, all of which Ive bought myself as part of my overall nest egg.

But today, in this Special Report, I want to introduce you to the belle of the ball, so to speak. What Im talking about is owning the best company in America tobacco giant Altria (NYSE symbol: MO).

Many otherwise thoughtful, intelligent people have railed against me on this stock. They have told me Altria is involved in a no-growth, declining-volume industry, with ever-dimmer future prospects.

Yet to accept that knee-jerk reaction is to ignore this companys massive free cash "ow, its high return on equity, and its ability to generate pro!ts in good and bad economic times alike.

Lets look at reality: It costs about 2 cents to make a pack of cigarettes, which is sold for anywhere between $5 and $12, depending on the state. In addition, state and federal governments raise large sums of money by taxing this product, meaning they have a vested interest in making sure manufacturers dont go out of business anytime soon.

Apple is a great, pro!table company, but even they would kill for Altria-like pro!t margins on any of their products. Altria is one of the only companies in the world that is able to enjoy this degree of pro!tability.

Another factor may sound like a liability, but is actually a bene!t: the ban on cigarette advertising. Thats because Altria owners of the leading Marlboro brand, among others already has vast brand recognition and is the established juggernaut. So without advertising, upstarts and competitors have a much tougher time making any inroads into its dominant market share.

Wouldnt you like to own a company with an affordable product, high margins, and 50 percent market share in an industry where competitors have almost zero chance of muscling in on your business, due to severely limited marketing options?

This Secret Makes Altria the Most 3URWDEOH6WRFN

Special Report 7KH:RUOGV*UHDWHVW'LYLGHQG6WRFN 3

that just 3 percent of the return came from capital appreciation!

So why is it that so many stock-market gamblers keep chasing after capital gains? Because thats whats considered sexy.

Unfortunately, oftentimes, whats considered sexy isnt what is actually smart. Whats smart is to go where the real returns are. And the real returns overwhelmingly come from reinvested dividends.

In building your own Dividend Machine, I want you to combine two mighty forces compound interest and the power of reinvested dividends for a total return that blows index funds right out of the water.

My own experience is telling. In 1994, I rolled over an individual retirement account into Altria and have since reinvested the dividends. Flash forward to 2011: My Altria holdings pay me more than 78 percent of the initial investment from 1994. My portfolio has grown by more than 1,329 percent in that time span, greater than 15 percent compounded annually.

On one stock: Altria.

A "uke? Lets introduce some more facts for you to digest. In 2007, Siegel revealed that Federal Reserve Chairman Ben Bernanke had his entire portfolio in one single stock: Altria.

Now Bernanke, who also is a respected economist, has not amassed the investment record of Warren Buffett, but lets examine some facts that Bernanke must have considered.

From 1925 to 2007, Altrias average annual returns (when considering reinvested dividends) exceeded 17 percent a year, versus 10 percent for the market, surpassing all other stocks, according to Siegels study.

Since 1957, when Siegels study of the S&P 500s highest-yielding stocks began, considering reinvested dividends, one stock has reigned supreme: Altria.

Lets get some perspective on that. In 1957, $10,000 invested in the S&P 500 composite, with dividends reinvested, would have returned $1.4 million, about 10.9 percent compounded annually.

The same $10,000 invested in Altria, with dividends reinvested, returned more than $46.2 million! Is this a signi!cant difference to you? It is to me.

I personally started buying Altria in 2000 at $24 per share, and the stock promptly dropped almost 25 percent in less than two months.

Thankfully, rather than acting like a normal stock investor and bailing out, I had the sense (and the fortitude) to continue to accumulate more shares at prices as low as $18.75 per share.

The stock was over $38 per share eight months later.

$OWULD+LJK5LVNRU+LJK5HZDUG"So, why do critics continually claim that Altria is not

a good stock to own?

The !rst reasonable question they ask is: What happens if smoking is made illegal?

Here are the facts: The United States is over $16 trillion in debt and appears ready to run trillion-dollar de!cits for the next decade. Almost every state government is broke, despite the billions of dollars raised in state tobacco taxes.

It is estimated that the personal income tax would have to be almost doubled to make up the shortfall in taxes generated by tobacco federal excise taxes, payroll taxes, and federal income taxes. Politicians in Washington would not be re-elected if that happened.

Consider what Napoleon said in the 1800s, This vice brings in one hundred million francs in taxes every year. I will certainly forbid it at once, as soon as you can name a virtue that brings in as much revenue.

Another worry is that increased state and federal excise taxes will hurt demand. That hasnt proven true

Bill Spetrino is a professional investor who has earned millions for himself and his A trained accountant, he graduated from John Carroll University in Ohio and spent a as well, Spetrino set out to understand and for life, an idea that eventually led to the

dD,Consume, Consume, and Consume More t^:d , ,K

in reality.

Canadian smokers pay more than $12 a pack for Marlboros that cost $5 here. That tells me theres a lot of latent pricing power in the U.S. market that Altria has at its disposal.

A third argument against Altria is the shrinking percentage of the U.S. population that smokes. Thats true. But the tobacco market remains enormous, with $721 billion in sales annually. And even though the market is not experiencing double-digit growth, it is still growing at a rate of about 4.5 percent per year.

Whats more, Altria has diversi!ed into the premium wine and beer businesses as well and continues to grow its smokeless cigarette business.

Another reason critics dont like Altria is the notion that lawsuits will bankrupt the industry. Yet consider this fact: Any tobacco judgments that are won in a state are deducted from the amount each state gets from the national settlement, which is separate from the states own tax.

For example, if Illinois gets $7 million in 2013, but a smoker wins a $5 million lawsuit, then Illinois will not get the $7 million it expects in 2013. The state will get only $2 million, per the settlement. Will a state appellate judge rule for a smoker who wins a large judgment when he knows the money is squeezed from a !nancially struggling state? I personally dont think so.

The last reason is that the dividend is somehow not safe because the payout ratio is 92 percent, which is quite high. On the surface, that sounds legitimate. However, Altria has more than a 50 percent market share and is growing its market share annually. The product, unlike most, is not capital intensive and costs just pennies to produce. Advertising is illegal, so a competitor trying to gain market share does not have many options.

In short, Altria is a recession-proof business and sells an easily affordable product with predictable income. By acquiring shares today you can feel comfortable knowing that your dividends are being paid by one of the worlds most pro!table companies.

This company is so stable that it makes IBM look risky. As an investor, you really cant ask for much more than what Altria can give you a 17 percent average return.

Sincerely,

Bill Spetrino

7KH:RUOGV*UHDWHVW'LYLGHQG6WRFNSpecial Report

2011 The Dividend Machine. All Rights Reserved. The Dividend Machine is a publication of Newsmax Media, Inc., and Newsmax.com. It is published monthly for $99 per year and is offered electronically through Newsmax.com and Moneynews.com.

For rights and permissions, contact the publisher at P.O. Box 20989, West Palm Beach, Florida 33416. To contact The Dividend Machine, send e-mail to: dividendmachine@newsmax.com Subscription/Customer Service contact (888) 766-7542 or dividendmachine@OFXTNBYDPNr4FOEFNBJMBEESFTTDIBOHFTto dividendmachine@newsmax.com.

Chief Executive Of!cer &+5,6723+(558''