Here’s A Look At One Of My Favorite “Bulletproof” Income Payers
I hate to sound like a broken record to my longtime readers. But sometimes, it feels like I’ve been saying the same message for years.
That’s okay, though. I’ll keep repeating myself because it’s what investors need to hear.
I’m talking about ideas like…
– Successful dividend investing does not have to be complicated.
– The high yields are out there… if you know where to look.
– If you want to build wealth over time systematically, then dividend reinvestment is the way to go.
Sometimes the message can’t be contained in a pithy saying, though. Instead, you have to show them to really get the message across. Why? Because most people are looking for a big score that will make them rich overnight. I wish them the best of luck. But if that’s you, then what I’m about to share today isn’t for you.
Introducing: “Bulletproof” Stocks
For the past couple of years, I’ve been telling my readers about what I call “bulletproof” securities.
The main idea is simple enough. These are stocks that have proven themselves to be so strong, so reliable, and so generous… that they can be counted on, no matter what happens with the economy.
You can find “bulletproof” stocks by seeking out exceptional companies with sustainable competitive advantages that routinely generate surplus free cash flow — and share it generously with stockholders in the form of dividends.
When you find a stock like this, the rest is simple. Instead of “renting” a ticker symbol like most individual investors, take a page from the Buffett playbook. Buy it, hold it dearly, and don’t let it go.
This whole process is easier said than done, of course. But it is possible. That’s why I want to introduce you today to a company that fits the “bulletproof” bill perfectly. If history is any guide, stocks like this should continue producing excellent returns for for many years.
One Of My Favorite “Bulletproof” Stocks
It’s impossible to know where interest rates, gold prices, and stock market averages are headed. But I can guarantee you one thing — there will always be people betting on such things, whether for hedging, risk management, or plain old-fashioned speculation.
That’s where CME comes in. Formerly known as the Chicago Mercantile Exchange, CME has since absorbed the Chicago Board of Trade and New York Mercantile Exchange to form the world’s largest derivatives marketplace.
Investors around the globe use CME’s physical and electronic marketplaces to trade a dizzying array of futures and options contracts. The company runs exchanges humming with activity as traders speculate on the price of everything from wheat to copper to the Japanese yen – even bitcoin.
CME acts as the intermediary for 23 million options and futures contracts every single day. Entire fortunes are won and lost on some of these trades. But the outcome doesn’t really matter. Either way, CME collects its cut. Average rates per contract (RPC) stand at around $0.67. That doesn’t sound like much, but when you multiply it by millions of trades daily, those fees add up fast.
There’s a reason why they say it pays to bet with the house. Just look at how CME has fared against the S&P 500 over the past decade, and you’ll see what I mean…
Annual revenues are approaching the $5 billion mark. And net profit margins near 50% are among the highest you’ll find. That means CME keeps more of what it earns. And as trading volume has expanded, so have dividends.
Quarterly payouts have risen by half from $0.60 per share in 2016 to $1.00 in 2022, or $4.00 annually. But that’s just the beginning.
In addition to four regular quarterly dividends, CME also hands out a special dividend each December, something resembling a year-end gift to shareholders. The amount depends on profits, but it’s always sizeable. Investors were treated to $1.75 per share in 2018 and 2019, and the bonus was lifted to $2.50 in 2020. Then, in 2021, CME issued a $3.25 payment (an outlay of $1.2 billion).
CME has dished out more than $17 billion in regular and variable dividends to shareholders over the past decade. And with futures trading volume expanding at a steady pace globally, this trend is poised to continue.
Keep in mind that CME enjoys a legalized monopoly, with its core operations protected by tall barriers to entry. And with roots that trace back to the 1870s, this business was clearly built to stand the test of time.
Closing Thoughts
While we don’t know what the special dividend will be this year, CME doesn’t quite yield enough to meet the minimum threshold for inclusion into my premium High-Yield Investing portfolio based on the trailing payments.
But I still consider it a “bulletproof” dividend payer by any measure.
If you want security and peace of mind, then you need to have a few stocks like this in your portfolio. Not only will you sleep better at night, but you’ll likely also grow wealthy over time.
I encourage you to check out my full presentation about “bulletproof” stocks. You’ll learn about five safe, high-yield stocks with a proven track record of rewarding investors with more income year after year regardless of what’s happening in the rest of the world.