Simple, $50 a Month Retirement Plan

03/11/2011 11:32 am EST


Roger Conrad

Chief Analyst/Managing Partner, Capitalist Times

Before the information age brought dizzying, super-complicated trading strategies only a computer could easily decipher, many people a generation or two ago made respectable fortunes by purchasing stocks $50 or $100 at a time and holding them. This strategy is hardly dead—and Roger Conrad, of Utility Forecaster, has found an unexpected way of playing it, as he explains in this exclusive interview with

Roger, you recently wrote a very interesting piece where you looked at a group of stocks, and you said based on that you can’t say buy-and-hold is dead, because you did pretty well by buying them and just holding them.

Can you tell us what stocks those were?

Well, they were utility stocks. Essential service companies. What I did is I had a group of direct stock-purchase plans—basically, you send a check to the companies, and they reinvest dividends for you.

Now hold on—isn’t that the boring stuff that our grandparents used to do all the time?

It’s absolutely boring, and to be honest with you, essential services are the only industry I’d be comfortable doing that sort of strategy in. They tend to be very resilient in bad times—utilities have proven that over the past ten years, which have included several crisis moments.

Utilities have, over time, had an unparalleled ability to recover from any disaster, simply by paring back riskier stuff, de-leveraging, and so forth—getting back to their core businesses. I think the surest trend that you have is greater demand for essential services, be it electricity, or water, or communications.

Ever since the advent of urbanization in America, these things have been in increasing demand; utilities are the beneficiaries.

So, these are all dividend-reinvestment plans where people use dividends to reinvest, and then they also buy the stock at, like, $50 or $100 a month, or something like that?

Well, what I’ve done personally is own about a dozen of these things, and just basically buy and put them away, and just have the dividends continue to roll over.

I don’t think you should buy and forget, now—I want to make sure that’s a very strong distinction. You have to keep up with what’s going on with the underlying companies.

If they are weakening internally, you want to get out of them—and it can be a little bit more complicated to get out of a direct-purchase plan than it is to just pick up the phone and call your broker and get out. Not appreciably so, but you definitely want to keep your eye on them.

Of these plans that I bought, almost all of them have done very well. I have had a couple though, that have done quite poorly, so if I’d sold them I would have saved myself some money.

Can you name one of them that might be interesting for people to look at right now?

Well, for right now, I think Dominion Resources (NYSE: D) is certainly an interesting one, because they’ve made a practice of attracting as many Virginia shareholders as they can.

They have a plan actually: those who live in Virginia can actually buy stock directly from the company in $50 increments, and basically accumulate a collection of stock. That’s how I got involved with the company.

And, you know, it’s a growing company. It’s a well-run company. It can be as exciting as watching paint dry, as they build their asset bases, but it’s a very consistent, easy to understand story.

Capital spending plus favorable regulation equals higher cash flow, higher dividends, and higher share price—and that’s the formula they’ve followed for the last ten years.

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