The average investor thinks McDonald’s sells burgers.

This is a common misconception, and if you believe it…

… You’ll miss one of the best income opportunities of our time.

Here’s why: 95% of McDonald’s restaurants are run by franchise owners

They handle the labor costs, rising food prices, and store operations.

Meanwhile, McDonald’s just collects the rent and a royalty on every sale.

What does this mean?

The company gets paid whether the economy is booming or slowing down.

That’s why it raised dividends through every recession for the last 50 years.

It’s the kind of investment most investors wish they found early.

And there’s a smaller company running a similar playbook right now

It collects cash on food items sold in your local grocery store

It is generating an average revenue of $7 billion every year.

And it pays a dividend 3x higher than the market average.

Even better?

The stock is growing by roughly 10% every year.

So if you keep reinvesting your dividends, you double your money every 5 years.

Very few stocks can give you this kind of growth with a high margin of safety.

But that’s not even the best part about this new investment.

You want to know which stock I’m talking about?

Here’s how it works:

1. Take an annual subscription via this link

2. You will receive immediate access to our portfolio and the special report when it’s released next Saturday.

3. Not happy? Let us know within 90 days via support@compoundingquality.net and you will receive a full refund

Secure your spot

Everything In Life Compounds
TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

A sky-high yield may look like free money.

But it usually comes at a cost: unexpected dividend cuts

First, the income you’ve been counting on vanishes overnigh

Then you lose capital as the stock falls on news of the dividend cut

That’s why many high-yielding stocks can be so risky.

On the other hand, world-class dividend growers are different.

They give you the best of safety and consistent income growth.

That’s why Warren Buffett calls them perpetual cash machines.

For example, McDonald’s paid its first dividend in 1976.

It has increased its payout every year for 50 years.

And if you got in early, you locked in a 124% yield for life (based on your purchase price).

Did you miss out?

There’s an even better opportunity today.

Here’s the long story short:

You’ve heard about the global shift in dietary habits.

People want health-conscious, plant-rich, and sustainable diets.

And there’s only one company in the world that wins big here.

It supplies natural sugar alternatives to your favorite food brands.

And it touches the daily diets of 1 billion consumers worldwide.

It’s easy to see why it consistently generates over $7 billion annually.

For 15 years, it has posted a 10%+ return on invested capital (ROIC).

The dividend yield is roughly 3x what the S&P 500 pays.

And the profits are expected to grow by more than 10% every year.

But it gets even better…

The company is aggressively buying back its own shares, which increases your ownership percentage even if you don’t buy any additional shares.

The best part?

It just did something that locks in its competitive advantage for decades.

It is a $3.4 billion deal that almost no one outside Wall Street has heard of.

But if you are looking for a reliable, growing income stream built to thrive even in bear markets, this company’s secret acquisition is the ultimate buy signal.

I put everything you need to know in my latest research report.

It comes out next week.

If you want to make sure you get it, join Compounding Dividends before September 22 and you’ll lock in a 30% discount.

But you don’t have to wait for this report.

Today, we just added a 7%+ yielder to our High Yield Portfolio.

Join right now and you can read that investment case right away.

If you’re not happy after 90 days, just email support@compoundingquality.net and we’ll refund every cent.

This is a risk-free investment in yourself:

Claim Your 30% Discount Here

P.S…

Investors are guessing which food brand will win the grocery store wars.

But institutional players know there’s more money to be made owning the company that supplies key ingredients to big food brands.

That’s why they’re investing in the company I just told you about.

If you want to invest alongside the smart money, click here to secure your spot.

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Imagine collecting $12,380 every year on a $10,000 investment.

That’s a 124% yield on your original purchase price

And your income grows no matter what happens in the market

You’re probably assuming this is a tobacco business, like Altria.

Or a company like British Tobacco.

We are currently sitting on a profit of almost 100% for this company.

On top of this, British Tobacco pays us a yearly dividend of 9.2% (!) based on our cost price.

But what we’re talking about here is Egg McMuffins and Happy Meals.

The company, as you’ve guessed, is McDonald’s ($MCD).

If you’ve been keeping up, you know it’s been one hell of a dividend grower.

But I’m not here to tell you to buy it today (I have something better).

Sure, McDonald’s is arguably the best fast-food business ever built.

95% of the company’s restaurants are run by independent franchisees…

While management just sits back collecting rent and a percentage of sales.

That’s how early investors get a steady 124% yield every single year.

The only problem is that if you’re a new investor, you get only 2.7%.

Is that enough to cover your living expenses with inflation at 4%?

That’s where the second company comes in.

It is at the stage where McDonald’s was 30 years ago.

And it’s got the things we love in a dividend grower…

• High switching costs.

• Elite returns on capital.

• Excess cash returned to shareholders non-stop.

How does this company make money?

It sells natural sweeteners to packaged food brands.

And those brands can’t switch ingredient suppliers easily.

Why?

Well, changing the ingredients changes the taste of products.

This means they risk losing millions of loyal customers.

Food conglomerates will do anything to avoid this outcome.

That’s why they pay our company three times more for their ingredients.

And you guessed it: This pricing power means high returns on invested capital (ROIC).

For over a decade, this company has posted an annual ROIC of 10%+.

And if you’re an income-focused investor, it gets even better.

The dividend yield is roughly 3x higher than the market average.

What’s more?

The annual payout has grown by more than 12% for 15+ years.

At that rate, if you keep reinvesting, your paycheck doubles every 6 years.

But that’s just passive income...

The stock has grown by roughly 7% every year.

And if you combine capital appreciation with dividend reinvestment...

Here’s what happens in 10 years:

It means every $10,000 stake turns into $30,000, and your yield on cost is 15%.

Many investors have bought this company at fair value, or more.

But if you act fast?

You can buy the stock at a significant discount today.

It is currently trading at least 30% below its intrinsic value.

And the smart money knows a bargain when they see one.

Take the director of a $7.3 trillion private wealth manager.

He just bought more of the stock again…

And many great investors are quietly accumulating shares.

What do they know about this stock that you don’t?

I put everything you need to know in a new research report.

It’s not for sale.
But you can get it for free today.

How?

Give Compounding Dividends a try.

This is a service that solves 3 of your biggest headaches.

Problem 1

Most “high-yield” stocks cut dividends without warning.

When this happens, the stock price falls, and you lose money.

Like what happened with Papa John’s:

Problem 2

Yields from the so-called “safe” dividend stocks can’t keep up with inflation.

Our companies protect you against inflation.

Problem 3

Suppose you want to find the safest, highest-yielding stocks.

You will spend countless hours digging through annual reports.

Even then, you still might not know which stock is worth your money.

Compounding Dividends solves
These 3 investing problems for you.

We focus on stocks with:

• An attractive yield today

• Growth potential tomorrow

They protect your capital.

They grow your income in bull markets and bear markets.

A few of our current positions:

• A consumer staples holding paying 9.2% on our original cost.

• A North American energy producer that’s up 75% in less than a year.

• A healthcare company growing its payout 16% annually.

The average income investor never sees returns like these.

But as a new partner, you’ll get full access to our dividend portfolio.

We own 18 stocks, and you’ll get the investment case for each one.

Including the “boring” cash machine I just told you about.

It’s the next stock we’re adding to Our Portfolio.

In addition, we will always update you on all our investment decisions.

This way you’ll never have to figure anything out yourself.

Want to take advantage of our research on quality dividend growers?

The annual subscription is $499.

But if you act now, you’ll pay only $349.

That’s a 30% discount.

And if you’re not happy after 90 days?

We will refund every cent.

That’s how confident I am in the stocks we write about.

If you’re still interested:

Click Here to Start Your 90-day Trial

P.S.

Early investors in McDonald’s collect over 120% every year. We’re seeing that same early-stage setup in one food company right now. It is even trading at a rare 30% discount, but not for long. Join now and make sure you get the report.

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

The series where I teach you 5 things about dividend investing in less than 5 minutes.

Subscribe now

1️⃣ Dividends = Profit Distributions

It’s a common misconception that paying out a dividend lowers a company’s stock price.

The image shows why that’s not true.

As the profits increase, so does the company’s value.

When they pay a portion of those new earnings as a dividend, in theory, the value goes down by the amount paid out.

You aren't losing stock value, you are just receiving your cut of the business's profit.

2️⃣ Investors Chase Performance

Your biggest enemy in investing?

Your emotions.

They make you feel good buying stocks when they’re expensive.

And selling when they’re cheap.

The image shows that the most money flows into the market after periods of the best performance, and then flows out at the low points.

3️⃣ An Investing Quote

It’s easy to look at a chart in hindsight and swear you’d never make those mistakes.

But when the market actually tanks, it’s incredibly hard to stay logical.

The image above proves that most people can’t.

Peter Lynch says that it’s not because people can’t understand the logic, but because they can’t handle the emotions.

4️⃣ Low Expectations Lead to High Returns

Researchers looked at stocks with the most optimistic and pessimistic growth forecasts.

They found a predictable cycle:

• Analysts overreact: Fast growth makes analysts assume the trend will last forever, the same is true when growth is slow

• Nothing lasts forever: The growth trend almost always changes, forcing analysts to cut their optimistic predictions, or raise the pessimistic ones.

• Returns are the opposite of expectations: Stocks priced for perfection end up delivering low future returns, and the opposite is true for low expectation stocks.

You can read the whole paper here.

5️⃣ Example of a Dividend Stock

A stock with low expectations right now?

PepsiCo.

Most people think of PepsiCo as just a beverage company, but it actually generates more than half of its revenue from dominant snack brands like Lay's and Doritos.

Sales have been slow, and the market is worried that GLP-1 drugs will reduce snack demand.

Key numbers from Fiscal.ai:

• Profit Margin: 10.9%

• Forward PE: 15.7x

• Dividend Yield: 4.2%

• Payout Ratio: 74.7%

P.S.

We’re about to buy a business we believe is becoming better, more predictable, and more profitable.

Before the investment case rolls out, we’ll be celebrating with some limited-time discounted opportunities to become a paid partner.

Make sure you don’t miss it by getting on the waiting list.

I’ll send you a checklist for Chuck Akre’s 3-Legged Stool Framework when you do.

👉 Download it here

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Each month, I’ll give an overview of my favorite stocks of the month.

Let’s dive into this update and show you some of my favorite stocks.

August 2026

The S&P 500 was up +1.2% in August.

Investors are fearful today according to the Fear & Greed Index:

Best & Worst Performers

This overview shows you the best and worst performers in our investable universe.

Worst performers

The cheaper we can buy great companies, the better.

The biggest decliner this month? FinVolution, losing 31%.

FinVolution Group runs an online consumer finance and fintech platform across China and international markets.

They reported second-quarter revenue and net income that trailed the prior year, along with rising loan delinquency trends.

Best Performers

Salesforce was this month’s best performer, increasing by 35.7%.

Salesforce provides customer relationship management (CRM) software and enterprise cloud computing solutions.

Salesforce reported a second quarter earnings beat and an 11% year-over-year increase in revenue, easing market concerns about slowing software demand.

Spotlight: Rollins ($ROL)

How Rollins Makes Money

Rollins is the parent company of Orkin and a global leader in pest and termite control.

Rollins provides service to two main groups:

• Residential homeowners

• Commercial businesses

Why Rollins deserves to be in the spotlight:

• Route Density: Pest control is a localized business, the more customers Rollins has in a neighborhood, the less time technicians spend driving. That creates operating leverage and keeps margins high.

• Recession Resistance: Pest control is an ongoing, non-discretionary need, meaning customers keep paying Rollins no matter what the economy is doing.

• Recurring Revenue: Customers usually sign long-term, recurring contracts, giving Rollins predictable, stable revenues and cash flows.

Why the stock is down:

Rollins is an amazing business, but because it is so predictable and high-quality, the stock is almost always priced for perfection.

Rollins’ residential part of the business had some softness last quarter, and management slightly lowered guidance for organic revenue growth by 1% for 2026.

That led to the stock decreasing around 12%.

Rollins stock is down nearly 50% from the beginning of the year, which has brought it down from a very expensive valuation to a more reasonable multiple.

September Best Buys

I scanned our Buy-Hold-Sell List for great quality compounders, defensive stalwarts, and dependable dividend payers trading at attractive discounts.

Let’s dive into 5 of our favorite income ideas for this month!

5. Northrop Grumman ($NOC)

How does Northrop Grumman make money?

Northrop Grumman is a defense contractor that builds aerospace systems, defense technologies, and advanced weapons for the U.S. military and its allies.

The defense industry has very high barriers to entry.

Developing stealth bombers and space systems requires specialized knowledge, a lot of capital, and deep government relationships that new competitors can’t replicate.

Northrop is currently sitting on a record $105 billion backlog of orders.

That backlog will turn into future earnings, which management uses to buy back shares and increase the dividend.

4. Vinci SA

How does Vinci make money?

Vinci is a French concessions and construction company. They design, finance, and operate major infrastructure projects globally, with a heavy focus on European toll roads and international airports.

Vinci’s toll roads and airlines are local monopolies, which gives them strong pricing power.

Every time motorists drive on Vinci’s motorways or airlines use their airports, they collect fees.

Management takes the cash flow from these mature concessions and uses it to fund new assets, like the energy portfolio Vinci is building, along with a very attractive, growing dividend for shareholders.

But there’s more

Northrop Grumman and Vinci are just two of our five favorite ideas this month.

The best one is still to come.

It’s a business we believe is becoming better, more predictable, and more profitable.

And it’s one we’re planning to buy for the Compounding Dividends portfolio.

Before the investment case rolls out, we’ll be celebrating with some limited-time discounted opportunities to become a paid partner.

Make sure you don’t miss it by getting on the waiting list.

I’ll send you a checklist for Chuck Akre’s 3-Legged Stool Framework when you do.

👉 Download it here

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Our investable universe currently contains 196 stocks rated ‘buy’.

Last month there were 157.

Let’s look at this month’s Buy-Hold-Sell list update and see what interesting opportunities we can find!

Buy-Hold-Sell List

The Buy-Hold-Sell List filters our very large Investable Universe.

We look for cheap Dividend Stocks based on three valuation methods:

1. The PEG Ratio

2. Current Yield vs Historical

3. Reverse Dividend Discount Model

Based on this, we give each company a Buy, Hold, or Sell recommendation.

Update August 2026

Some Interesting Stats:

• 196 companies total receive a ‘buy’ rating

  • That’s up from 157 last month

  • And 176 the month before

• 42 moved from ‘hold’ to ‘buy’

• 49 have moved up from ‘sell’ to ‘hold’

• 6 made the jump from ‘sell’ directly to ‘buy’

Recommendation Changes

7 companies went from Buy to Hold due to increasing stock prices.

Here’s a sample of a few:

• Automatic Data Processing (ADP): A leading global provider of cloud-based human capital management solutions. AI fears seem to declining, and ADP is up close to 50% since the April lows.

• Microsoft Corp (MSFT): A global technology titan dominating in software, cloud computing (Azure), and AI. Strong enterprise demand and continued cloud revenue growth have pushed Microsoft shares up.

• SAP SE (SAP): A multinational enterprise software leader. Their highly successful transition to cloud-based subscriptions and dominant ERP market positioning have resulted in significant share price gains over the past month.

• HP Inc. (HPQ): A prominent provider of personal computers and printing solutions. HP has been able to raise prices to offset falling volumes, leading to consistent free cash flow that’s pushed up the share price nearly 10% over the past month.

We also found some incredible hidden gems this month, including a European logistics giant trading at a 104% discount to its historical yield, and a massive landlord with 100% rent collection.

But there is one specific company on this list I want to focus on today.

I have been putting the finishing touches on our next major portfolio acquisition, and the setup is looking incredible.

It’s sitting right here on our “Buy” list, and it ticks every single box for our strategy:

• The Yield: It currently pays a safe dividend yielding over 3%.

• The Buybacks: Management consistently buys back their own stock, driving up the value of our shares.

• The Catalyst: They just finalized a transformational acquisition that fundamentally upgrades their entire business model and secures massive, long-term pricing power.

This is exactly the kind of boring, highly profitable company that generates serious long-term wealth.

I am going to be releasing the full breakdown of this company, and officially add the stock to our portfolio very soon.

When we do, we’ll also open a special, limited-time discounted invite to join us.

Keep a close eye on your inbox. You will not want to miss this one.

Want to make sure you’re the first to get it?

👉 Join the Waitlist Here

When you do, I’ll send you Charle Munger’s 5 Rules of Wealth to help you become a better investor.

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Smith completely changed the way he invests because he believes the stock market has fundamentally changed.

But Terry Smith isn’t the only investor who noticed this change. David Einhorn saw it, too.

And he came to a very different conclusion about what to do about it.

Einhorn runs Greenlight Capital, a hedge fund he launched in 1996.

In the first 10 years, he returned an average of 26% per year, well above the market.

He’s also well known for shorting Lehman Brothers in July of 2007.

Lehman went bankrupt in September of 2008, kicking of the Great Financial Crisis.

But investing is a difficult game, and Einhorn hasn’t always been a winner.

From 2014 to 2018, Greenlight Capital’s assets under management went from $12 billion down to just $5.5 billion.

The fund dropped 11.3% over a three-year stretch, and then wend down another 34% in 2018 alone.

What happened?

Einhorn believed that the market had changed.

In a 2017 letter to his investors, a frustrated Einhorn wrote:

He was clearly starting to question his own strategy.

And it’s pretty easy to see why, just look at Tesla.

In 2017, Tesla was unprofitable.

It was burning through billions of dollars in cash.

By every traditional financial metric, it was a disaster waiting to happen.

So, Einhorn shorted it.

The stock went up 43% that year.

We don’t know exactly when Einhorn put the short on, or when he finally covered, but it’s a very safe bet he lost money.

Here is the craziest part: He was absolutely right about the company.

Years later, in 2020, Elon Musk publicly admitted that during the Model 3 production ramp-up, Tesla was about a month away from total bankruptcy.

This was during the period that Einhorn shorted the company.

They were on the edge of collapse.

But the stock market didn’t seem to care.

During that period, Tesla’s stock only fell about 30%, and most of that decline came right at the end.

If you zoom out a little further and it gets even crazier.

From January 2017 through the end of 2019, Tesla was actually up almost 93%.

Imagine being absolutely right about the business and still losing money.

Einhorn correctly identified the financial problems at Tesla.

But that didn’t matter. The stock price was driven by something else.

And this is where Einhorn and Terry Smith took two very different paths.

Smith decided to adapt to the new market.

Einhorn decided to become less dependent on it.

In his Q4 2023 letter, Einhorn told us exactly how he shifted his style.

He stopped buying cheap companies and waiting for the market to bid them up.

Instead, he started buying high-quality businesses that generated so much cash they could force their own returns by:

• Paying out significant divdends

• Buying back a lot of their own stock

• Getting bought by another company at a premium

He stopped relying on the market to pay him.

He started relying on the companies to pay him.

Sound familiar?

That’s the exact philosophy behind Compounding Dividends.

Terry Smith chose to adapt by joining the momentum.

That means competing with everyone else chasing the same companies.

Einhorn chose a different path.

He reduced his dependence on the market itself.

I like Einhorn’s solution a lot more.

We don’t need to hope the market suddenly falls in love with our stocks.

We just need to own great businesses that generate lots of cash, and let those businesses pay us.

That’s a strategy that can work regardless of what the market decides to chase next.

And we’re getting ready to put this philosophy into action again.

I’m finalizing a brand-new stock purchase for our portfolio.

It’s a company that fits this philosophy almost perfectly: high quality, strong cash flow, and a track record of returning that cash to shareholders.

And when we announce the new position, we’re also going to open a special, limited-time offer to join us.

Keep an eye on your inbox.

If you like the idea of letting great businesses pay you rather than waiting for the market to reward you, you won’t want to miss this one.

Want to make sure you’re the first to get it?

👉 Join the Waitlist Here

Your Immediate Bonus:

You don’t have to wait until the report drops to get started.

When you add your name to the VIP list today, I will instantly send you the Dividend Growth and Reinvestment Calculator.

You can download it right now, plug in your own starting capital, adjust your monthly contribution goals, and see exactly how the cash your companies are paying you will grow.

Download the Spreadsheet Now

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

The goal was simple: buy good businesses with a portfolio yield over 5%.

So far, we’re doing very well! Let’s give you an update.

Honestly, the timing couldn’t have been better.

The market has been a wild ride lately.

It feels like every other week there’s a new headline causing market volatility.

But you wouldn’t know it by looking at this portfolio.

Which is one of my favorite things about high yield investing.

The stability of cash flowing into your account makes it a lot easier to ignore market volatility.

Take a look at the exact numbers from our High Yield Portfolio as of today:

I’m very happy with the results since we started this real-money portfolio:

• An 11.58% Total Return

• $2,145.57 in locked-in annual dividend income

• $959.52 in cold, hard cash already in our account

Right now, the portfolio has a 6.14% yield on cost.

High Yield Isn’t High Risk

A lot of investors think that to get a high yield, you have to take a lot of risk, or buy complicated funds.

That’s not true.

There are no covered call funds, BDCs, or MLPs in this portfolio.

We just bought durable businesses with competitive advantages that the market was overlooking, and let them pay us for owning the shares.

High Yielders Outperform

And historically? The data shows that high-yield companies actually outperform the S&P most often:

High-Yield Doesn’t Mean High Payout Ratio

Another big myth is that a high yield means a business is fully mature and isn’t reinvesting enough capital to grow.

Again, the numbers prove this wrong.

You can lock in high starting yields with low payout ratios.

The Magic of Reinvestment

As happy as I am with how the High Yield Portfolio has performed so far, that’s not the best part.

Having more than $2,000 in dividends coming our way is great.

But what gets me more excited is what happens when our dividend snowball starts rolling.

The companies in Our Portfolio have good histories of dividend growth.

• Average 3-year DPS CAGR: 4.7%

• Average 10-year DPS CAGR: 7.3%

When you can reinvest those growing dividends, the compounding effect is very powerful:

Here is where things get really wild.

Let’s look at exactly what this math means for our actual portfolio.

Only Reinvesting

If we never put another dollar into the portfolio, and make some conservative assumptions:

• 5% stock price growth

• 5% dividend growth

Here’s what would happen if we just reinvested our dividends:

Adding Each Month + Reinvesting

Those numbers are pretty good.

what happens when we stick to our rule and add $5,000 every single month to this machine?

The income stream goes parabolic.

When we add our own contributions, and reinvest our dividends, it’s like going from letting a snowball roll on its own to actively pushing it down the hill.

It grows much quicker.

What’s Next - 2 New Buys

That brings me to what’s next.

In the next few weeks, we are making two major moves.

First, we are putting our next $5,000 into the High Yield Portfolio to keep that compounding machine rolling.

Second, we are adding a brand-new position to the main Compounding Dividends portfolio.

It’s a highly profitable cash machine.

And it just made an acquisition that turns it into a much better business.

The market hasn’t recognized it yet, so the stock is trading at a completely reasonable valuation.

I’m putting the final touches on the deep-dive research report.

When the report goes live, I’m also going to offer a limited-time discount to celebrate the launch.

Want to make sure you’re the first to get it?

👉 Join the Waitlist Here

Your Immediate Bonus:

You don’t have to wait until the report drops to get started.

When you add your name to the VIP list today, I will instantly send you the Dividend Growth and Reinvestment Calculator.

This is the exact custom spreadsheet I used to calculate the future growth and income projections for our real-money portfolio.

You can download it right now, plug in your own starting capital, adjust your monthly contribution goals, and see exactly how fast your own dividend snowball will grow.

Download the Spreadsheet Now

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

It’s not just about the Berkshire meeting either, you get to hear from a lot of smart people.

One of them was Tom Gayner from Markel - let’s share what I learned from him in Omaha with you today!

Who Is Tom Gayner

Tom Gayner is one of the most successful investors in the world you probably never heard of.

He is currently the CEO of Markel Group, a company often described as a mini Berkshire Hathaway.

Born in 1961, Gayner developed his interests in business, investing, and accounting at an early age.

He studied accounting at University of Virginia and became a Certified Public Accountant (CPA) before entering the investment world.

In 1990, he joined Markel to manage the company’s investment portfolio.

At the time, Markel was a relatively small specialty insurance company.

Over the following decades, Gayner helped transform it into a diversified conglomerate with insurance operations, public stock investments, and dozens of wholly owned businesses.

What makes Tom Gayner special is his long-term track record.

Since joining Markel, the company’s book value per share compounded at roughly 13% annually for more than 30 years.

Like Warren Buffett, Gayner believes investing is simple, but not easy.

He focuses on buying high-quality businesses, run by honest and capable managers, and holding investments for long periods of time.

Gayner spends his time studying businesses and thinking about capital allocation.

That focus is what has made Tom Gayner widely regarded as one of the greatest capital allocators of his generation.

What I Learned From Tom

I saw Tom Gayner speak at Gabelli’s Value Investing Conference on Friday in Omaha.

He’s very good at making things simple, and getting down to the most important things.

There were 3 things that really stuck out to me during his presentation:

1. How Markel thinks about allocating capital in their business

2. How Tom thinks about competition within capitalism

3. How Tom filters public companies for investing

Let’s dive into each of them!

How Markel thinks about allocating capital in their business

Here’s how Markel prioritizes capital allocation in their business:

1. Proven capital applicators: Markel want to give money to managers, companies, or divisions that have done well in the past

2. Interesting opportunities / expansions: They want to invest in interesting opportunities and areas they can expand in within their own business

3. Public stock / bonds: Only when there are good opportunities

4. Repurchase shares: if there’s nowhere else to put the capital and if the stock price is right

Gayner says there’s no religion or formula, the goal is to put capital where it’s treated best.

How Tom thinks about competition within capitalism

He says it’s similar to Darwin’s idea of evolution and survival.

Businesses are under constant threat and competition, they can either adapt, migrate, or die.

Let’s understand these through some examples:

1. Adapt

Example: Netflix

• Netflix originally mailed DVDs to customers’ homes, which was a much more convenient alternative to visiting a video rental store

• As internet speeds improved, management saw that streaming would eventually replace physical media and began investing heavily in the technology long before it became mainstream

• The company later adapted again by producing its own content, transforming itself from a distributor of entertainment into one of the world’s largest entertainment creators

  

2. Migrate

Example: Berkshire Hathaway

• Berkshire Hathaway started life as a textile company, operating in an industry that was becoming increasingly uncompetitive

• Warren Buffett recognized that the textile business had limited prospects and began using the cash generated by the company to invest elsewhere

• Over time, Berkshire migrated from textiles into insurance, railroads, energy, consumer businesses, and dozens of other industries, becoming one of the most valuable companies in the world

  

3. Die

Example: Blockbuster

• At its peak, Blockbuster was the king of movie rentals, with thousands of stores and a brand that seemed impossible to challenge

• The company underestimated how quickly consumers would embrace online rentals and streaming, choosing to protect its existing business instead of reinventing it

• As customers moved to more convenient options like Netflix, Blockbuster’s business slowly unraveled until it eventually filed for bankruptcy

  

How Tom Gayner filters public stocks

Tom goes through four steps in order to find good companies to invest in

1. Profitable, good return on capital, without too much debt

2. Management with equal talent and integrity

3. Business needs to have reinvestment opportunities or capital return to shareholders

4. Buy it at a reasonable price

Let’s understand it through one of Markel’s portfolio investment companies:

Example: Berkshire Hathaway

One of Markel’s biggest position is Berkshire Hathaway.

Let’s take a look at this stock through Gayner’s lens:

Good business

• Berkshire owns a collection of highly profitable businesses across insurance, railroads, energy, industrials, and consumer products

• Many of these businesses have durable competitive advantages and generate strong returns on capital

• The company maintains a conservative balance sheet and a lot of cash

Great management

• It's hard to ask for a better steward of capital than Warren Buffett, and now Greg Abel

• Management has consistently treated shareholders as partners and communicated with unusual honesty

• Their decisions have compounded shareholder wealth for decades

  

Strong capital allocation opportunities

• Berkshire generates enormous amounts of cash every year

• That cash can be reinvested into acquisitions, existing subsidiaries, public equities, or share repurchases

• Few companies have as many high-quality options for deploying capital

Reasonable valuation

• Berkshire has often traded at a modest premium to book value despite owning a collection of exceptional businesses

• Investors are effectively buying a diversified portfolio of quality assets managed by proven capital allocators

• While not always cheap, the stock has frequently been available at prices that offered attractive long-term returns

Conclusion

A few lessons from Tom’s talk really stuck with me:

• Investing doesn’t have to be complicated. It’s about finding good businesses, run by good people, and buying them at a fair price

• Capital allocation matters more than most people realize. Over time, where a company puts its cash can have a huge impact on shareholder returns

• No business gets to stand still. The best companies keep adapting as the world changes around them

• Character matters. Tom repeatedly emphasized the importance of partnering with managers who have both talent and integrity

• The biggest winners often come from thinking in decades instead of quarters

What I like about Tom is that he focuses on a handful of simple ideas and applies them consistently over long periods of time.

Judging by Markel’s results, that’s worked out pretty well.

That’s it for today.

One Dividend At A Time

-TJ

P.S.

Earlier in this issue, I walked you through Tom Gayner’s 4-part checklist for finding great stocks.

Well, I’ve spent the last few weeks running the numbers on a company that checks every single one of those boxes.

It’s a highly profitable cash machine. The management team are master capital allocators. And despite dominating its industry, the stock is trading at a completely reasonable valuation.

I’m putting the final touches on a deep-dive research report breaking down exactly why I’m so bullish on this business. When the report goes live, I’m also going to offer a limited-time discount to celebrate the launch.

Want to make sure you’re the first to get it?

Join the Waitlist Here

Your Immediate Bonus:

You don’t have to wait until the report drops to get started.

When you add your name to the VIP list today, I will instantly send you my Capital Allocator’s Scorecard.

I took Tom Gayner’s exact 4-part framework and turned it into a simple, printable checklist. You can use it right now, today, to grade every single stock currently sitting in your portfolio to see if they make the cut.

Join the Waitlist Here

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

The series where I teach you 5 things about dividend investing in less than 5 minutes.

Subscribe now

1️⃣ Dividend Growers Outperform

Last week, we talked about the Dow Jones U.S. Dividend 100 Index, the engine behind the SCHD ETF.

It’s only been around since 2011, but S&P did a backtest on the methodology from June 2001 through June 2023.

They found that it outperformed the U.S. Broad Market Index by 1.52% per year.

Here’s how that difference actually stacks up over 20 years for a $50,000 initial investment in each:

• Dow Jones U.S. Dividend 100 Index: $455,489.23

• Dow Jones U.S. Broad Market Index: $346,296.86

Notice in the green circles that the International version also outperforms.

2️⃣ Growth Doesn’t Help If You Pay Too Much

The chart below shows the average 5-year return depending on two things:

• The initial P/E multiple paid

• The Forward 5-Year Annual Sales Growth Rate

Growth doesn’t bail you out if you pay too much.

We just saw this in the recent breakdown of Nike’s P/E multiple contraction.

3️⃣ An Investing Quote

Howard Marks is the founder of Oaktree Capital.

He’s known for his memos on investing.

Warren Buffett has said that when a memo from Howard Marks arrives in his mail, it is the first thing he opens and reads.

One of my favorite Marks quotes ties right in to the chart I just showed you:

4️⃣ The Calculus of Value

Since we just talked about Howard Marks, it only makes sense to share one of his memos next.

This one is “The Calculus of Value.”

Here is a quick look at what he covers:

• Why high stock valuations almost always lead to low future returns.

• How true value pulls on a stock price like gravity.

• Why overpaying for a great business is a trap.

You can read the memo here.

Or if you prefer listening, the audio version is here.

5️⃣ Example of a Dividend Stock

Let’s look at a business that passes Joel Greenblatt’s famous Magic Formula screener.

It hunts for companies that are both ‘good’ (high return on capital) and ‘cheap’ (high earnings yield).

Enghouse Systems is a Canadian company that builds enterprise software for contact centers, video communications, and network infrastructure.

Key numbers from Fiscal.ai:

• Profit Margin: 14.9%

• Forward PE: 14.3x

• Dividend Yield: 6.9%

• Payout Ratio: 91.3%

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Naturally, I got a lot of questions asking if the stock is finally cheap enough to buy.

So I decided to look at what else is trading around the same multiple, but growing faster.

Subscribe now

On Monday, we looked at how the market had priced Nike at 50x earnings for a business that was growing at less than 10% per year.

Today, that multiple has crashed down below 19x.

Not long after I hit publish, I got a great question inside Our Community:

“Since Nike has gotten so cheap, is it a great deal now?”

It’s a fair question.

When the stock of one of the world’s best brand falls close to 80%, it certainly feels like a bargain.

But investing is all about opportunity costs.

You only have so much capital to deploy.

Every dollar you put into one thing is a dollar you can’t invest somewhere else.

So, it got me wondering: What else can we buy in today’s market for the exact same price as Nike, but with much better historical growth?

A Nike Opportunity Cost Screen

I decided to run a screen to find out.

I set it up to look for companies trading at the same valuation as Nike, but generating roughly double the historical growth.

Here were the exact filters I used:

• P/E Ratio: 21 or lower (matching Nike’s current neighborhood)

• 10-Year Revenue CAGR: 12% or higher

• 10-Year Diluted EPS CAGR: 9.2% or higher

It gave me back 155 companies.

There are plenty of strong, growing businesses out there trading at a similar multiple as Nike.

Let’s look a three businesses from the list to see what I mean:

• Amazon (AMZN)

• Progressive (PGR)

• Copart (CPRT).

Side-by-Side Opportunity Costs

Here is how these three businesses stack up against Nike’s historical baseline.

When you look at it this way, it’s hard to argue that you should pay 18x for Nike, when you could buy the other three businesses at similar valuations.

If you want the full results of the screen, you can see them here:

Download the Screen Results

Let’s look a little deeper into the screen results.

Lowest P/E

Let’s start with the stocks that are growing faster than Nike, but trading at a lower multiple.

Here’s the cheapest companies with positive earnings:

A lot of these are priced so low for good reason, there aren’t a lot of good businesses here.

But if we go to a big higher P/E multiple, we start to see some potentially interesting businesses.

If you want to stay in the apparel world, Lululemon is at half of Nike’s multiple with double the growth rates.

Crocs is also on the list at only 10x earnings.

Fiserv is a stock that a lot of professional fund managers have owned, and insiders have been buying.

Green Brick Partners is a top holding of David Einhorn, who’s one of my favorite investors.

Highest Revenue Growth

The companies that have grown their revenue the fastest over the past decade are as follows:

Cheniere Energy stands out as a company with a strong moat.

They own and operate Liquified Natural Gas (LNG) infrastructure, including:

• Own the Sabine Pass LNG Terminal in Louisiana

• Own the Corpus Christi LNG Terminal in Texas

• Own the Creole Trail Pipeline (94-mile natural gas pipeline)

• Operate the Corpus Christi Pipeline (21.5-mile natural gas pipeline)

Highest EPS Growth

Here are the companies that have grown their EPS the fastest over the past decade:

Lumentum Holdings is another interesting example of how a company can appear cheap.

It produces Optical Communications products and Commercial Lasers.

It’s one of the companies in the AI supply chain that has seen huge growth, and a run in the share price.

That’s because there’s expected shortages in the components it makes due to the hyperscaler data center build out.

It shows up in our list because of the negative P/E ratio.

Lumentum has negative Net Income, but $500 million in Operating Income.

That’s because they issued 10.6 million shares to redeem about $1.1 billion in debt.

Which results in a significant accounting loss.

If we use Operating Cash Flow, which doesn’t include the adjustment for the new shares, Lamentum is trading at 111x!

Conclusion

Today we covered three important lessons:

• Down doesn’t always mean cheap: Just because a stock has fallen 75% doesn’t mean it’s a bargain

• Opportunity cost matters: Every dollar you put into one idea is a dollar you can’t invest in another.

• Compare your options: Think of buying a stock like shopping, look around to see if you can find a better business for the same price.

Today, our paid members are also getting this list filtered down to include only dividend paying companies.

Screens like these are great to get some ideas, but buying a great company at a great price takes a lot more research.

Over the next few weeks, we have some exciting things in the pipeline:

• A brand-new portfolio addition: A high-quality company we’re getting ready to purchase (and no, it’s not any of the 155 names on today’s screen).

• A complete research deep-dive: Breaking down the business model, valuation, and the thesis behind our next buy.

• A rare discount: A limited-time opportunity to upgrade your subscription and follow along in real-time.

We’re finalizing the details now.

Make sure to watch your inbox over the next couple of weeks.

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Schwab’s U.S. Dividend Equity ETF (SCHD), and its track record speaks for itself.

European regulations make it impossible for you to buy... but I may have just found an interesting option.

Subscribe now

SCHD has an incredible track record.

It’s currently got a starting yield of around 3%.

That’s nearly 3x the yield of the S&P 500, which is currently around 1%.

Not only do you start with an attractive yield, you get a strong history of dividend growth.

• 5-year dividend CAGR: 9.2%

• 10-year dividend CAGR: 10.6%

SCHD has been around for nearly 15 years.

If you would have invested $10,000 when it was first offered, here’s what your investment would look like today:

• Your $10,000 is now worth $65,277

• You receive more than $1,950 in dividends each year

• That’s a yield on cost of 19.5%

2026 has been a very good year for SCHD so far.

Its total return is significantly outperforming the S&P 500 year to date.

How has SCHD delivered such impressive results?

Unlike a lot of dividend ETFs, SCHD looks at more than dividend yield.

It’s also looking at dividend quality.

In short: it buys good businesses.

But if you live outside the U.S., you know the main problem - you can’t buy it.

Thanks to UCITS regulations, SCHD isn’t available in Europe.

But what if you could take SCHD’s fundamental screening and apply it globally?

The Dow Jones U.S. Dividend 100 Index

SCHD tracks the Dow Jones U.S. Dividend 100 Index.

You can think of it as the fundamental engine under the hood of the ETF.

Here is the methodology behind it:

1. Consistency: It starts with companies with 10 consecutive years of dividend payments

2. Dividend Yield: It sorts those by yield and cuts the bottom half.

3. Financial Health: It looks at cash flow to total debt, and Return on Equity (ROE).

4. Capital Returns: Finally, it ranks them by dividend yield and their 5-year dividend growth rate.

After all of that, only the best 100 companies are included in the index.

This methodology is beautiful.

It gives us strong businesses with attractive starting yields and future dividend growth.

We want an ETF that does exactly this, but is available to everyone.

⭐ ETF Spotlight

Amundi S&P All World High Dividend Yield UCITS ETF Dist (AWHD)

Key Information

• Name: Amundi S&P All World High Dividend Yield UCITS ETF Dist

• Ticker: AWHD

• ISIN: IE000LEIJUY9

• Management Fee: 0.35%

• Physical/Synthetic ETF: Physical

What?

This ETF tracks the S&P Global Dividend 100 Index.

Does that index name sound familiar?
It should.

This index is designed by the exact same provider (S&P Dow Jones Indices) and uses the same fundamental methodology as SCHD’s index.

The only difference?

It applies its quality screen to the global Large and MidCap universe, not just the US.

It selects 100 global stocks with a consistent record of paying dividends and strong business fundamentals.

Why?

This ETF gives European investors access to the same methodology SCHD uses without running into regulatory walls.

Plus, you get global diversification.

Backtests of the index show that it produces attractive dividend yields:

And dividend growth:

Sector Split

Here’s the sector split:

Financials are the largest sector (26.37%), followed by Industrials (17.12%) and Energy (15.13%).

Country Weightings

Here are the countries the ETF is invested in:

The ETF invests more than 2/3 of its assets outside the U.S. which provides significant global diversification.

Top Holdings

Here are the top 10 positions of the Amundi S&P All World High Dividend Yield UCITS ETF:

My main concern with this ETF right now?

It’s very new, with less than $5 million USD under management, and no distribution history.

But it is managed by Amundi, the largest asset manager in Europe with over €2 trillion under management.

ETF Portfolio Update: August 2026

I haven’t written about the ETF Portfolios in quite a while.

Let’s give you an update of where they are!

Our Portfolios are a mix of ETFs focused on generating a growing stream of income over the long term.

We use several factors that have historically performed well for dividend growth investors:

• Quality: Only invest in companies with durable economic moats and strong cash flows.

• Yield & Growth: High starting yields combined with historical dividend growth.

• Global Reach: Access to the best capital allocators worldwide.

Paid subscribers have 24/7 access to our ETF Portfolios and will get an extensive update on what’s going on with them.

Quick Poll: What Would You Do?

Before you go, I’d love to get your take on this month’s spotlight ETF.

(Click your choice above or leave a comment below to share why)

One Dividend At A Time,

-TJ

P.S.

Next month, we are adding a brand-new position to our individual stock portfolio.

It’s an essential boring business that millions of people interact with every single day without ever seeing its name. It holds a near-unassailable moat in everyday consumer staples, produces massive free cash flow, and has been aggressively raising its dividend for years.

We’ll be opening up a rare, limited-time discount on annual subscriptions so you can read the full research report before our buy order goes live.

Keep a close eye on your inbox, you won’t want to miss this one.

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

And not for good reasons - the stock is down 76% over the past 5 years.

Even being a long-term holder hasn’t saved you - it’s down more than 31% in the past decade.

Of course, fingers are being pointed all over the place.

Some claim management destroyed the brand:

Some people blame it on competition, declining quality, or Nike getting greedy with high-end, limited releases.

But as the saying goes, when you point one finger, three more are pointing back at you.

Let me tell you why Nike is really down, and why investors should be looking to blame themselves.

Nike in 2020

Let’s assume you were looking to buy Nike in late 2019 or early 2020, before the pandemic.

Here’s what a long-term view of Revenue and Net Income would have looked like:

Revenue growth is fairly steady, Net income has some down years, but overall both are growing.

• Revenue has grown at 7.6% per year

• Net Income has grown at 8.6% per year

Nike has had high ROIC, and maintained attractive Gross and Net Profit Margins.

Obviously they have a strong brand, global distribution, etc.

Things are looking good.

What would you pay for such a business?

If you were buying in the time frame I’ve been showing you, Mr. Market was offering up Nike at anywhere from 30x to 36x earnings.

Personally, I wouldn’t pay 30x earnings for a business growing at 8%, but obviously plenty of people did.

And they did OK… for a while.

Between October 2019 and March of 2020, Nike traded between $89 and $105 a share.

By the beginning of 2022 it had run up to $160 or $170 a share.

Did the business get way better?

Nope. It got way more expensive.

It ran up to 80x earnings on (on depressed 2020 sales), but for much of 2021 and 2022 it was still trading between 40x and 60x earnings.

When you pay 50x earnings, the expectations implied by that price are very high.

Even if the business continues to grow, if the multiple compresses, it’s a huge headwind.

Nike’s revenue and profits declined and the multiple compressed down to 19x.

The lesson here is that it’s not enough to buy a great business.

You have to buy it at a reasonable price.

Yes, Nike’s revenue and earnings fell.

Yes, management made mistakes.

But I think investors should take a hard look at themselves and ask why they were willing to pay 40x or 50x earnings for a business that had been growing at 8% in the first place.

Want another example?

Rollins.

The stock is down almost 45% since February.

The multiple has gone from 60x earnings to 43x.

Underlying business growth rate?

• 9% for Revenue

• 12% for Net Income

Rollins is a great, durable business that I’d love to own someday.

But am I going to pay 42x earnings for it?

Nope.

Valuation matters.

Conclusion

The market has more Nikes and Rollins out there.

There are incredible businesses with strong moats, currently trading at valuations that price in decades of strong (likely unrealistic) growth.

They might keep going up for a while.

But eventually the gravity of basic economics pulls everything back down to earth.

Next time you find a business you love, remember:

Price is what you pay. Value is what you get.

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Each month, I’ll give an overview of my favorite stocks of the month.

Let’s dive into this update and show you some of my favorite stocks.

July 2026

The S&P 500 was up +0.2% in July.

Investors are neutral today according to the Fear & Greed Index:

Best & Worst Performers

This overview shows you the best and worst performers in our investable universe.

Worst performers

The cheaper we can buy great companies, the better.

The biggest decliner this month? Monro Inc., losing 34%.

Monro runs a national chain of automotive service and tire centers.

Monro’s stock dropped because weak consumers aren’t spending much on auto service, and the company reported an unexpected loss of $0.09 per share for its most recent quarter.

Revenue has declined year-over-year, after the company closed 145 underperforming stores.

And management reported that with high gas prices persisting, consumer trends were not any better in July.

Best Performers

Paycom Software was this month’s best performer, increasing by more than 50%!

Paycom provides cloud-based human capital management and payroll software.

The stock has gone up because of a strong earnings report and improving margins due to AI efficiency.

• Revenue grew nearly 10% year-over-year to $531 million.

• Management raised its full-year 2026 revenue guidance

• AI-driven automation tools are boosting efficiency, leading to expanding profit margins and stronger free cash flow

Spotlight: Home Depot ($HD)

How Home Depot Makes Money

Home Depot is the world’s largest home improvement retailer.

They sell building materials, home improvement products, and lawn and garden supplies to two main groups:

• Do-it-yourself (DIY) customers

• Professional contractors (Pros).

Why Home Depot deserves to be in the spotlight:

• Scale Advantages: Home Depot operates an efficient supply chain, and its size allows it to negotiate better terms with suppliers than smaller competitors. These work together to keep Home Depot’s margins high.

• The Pro Customer Base: Professional contractors make up a significant portion of their sales. Pros are sticky, repeat customers who buy in high volumes and need Home Depot’s reliability and product availability.

• High Free Cash Flow: The company generates a lot of free cash flow, which management consistently uses to pay a growing dividend and buy back shares.

Why the stock is down:

Home Depot had 4 quarters where their Net Income fell compared to the year before - a streak they finally broke this quarter.

But the falling profits are due to macroeconomic factors rather than business issues.

The U.S. housing market has slowed down, which means so have home improvement projects and renovations:

• High Interest Rates: Increased mortgage rates have locked homeowners into their current houses, causing existing home sales and housing turnover to slow down.

• Delayed Projects: Because borrowing costs are high, consumers are delaying large, debt-financed remodeling projects (like full kitchen or bathroom renovations).

The fundamental business remains intact, making this an opportunity to look at a high-quality operator being temporarily pressured by the economic cycle.

August Best Buys

I scanned our Buy-Hold-Sell List for great quality compounders and dependable dividend payers trading at attractive discounts.

Let’s dive into 5 of our favorite income ideas for this month!

5. VICI Properties ($VICI)

How does VICI make money?

VICI is a real estate investment trust (REIT) that owns one of the largest portfolios of gaming, hospitality, and entertainment destinations, including highly regulated assets on the Las Vegas Strip like the MGM Grand and Caesar’s Palace.

It’s very difficult to build a new casino in Las Vegas - land on the Strip is limited, there are high regulatory barriers, and assuming you clear those hurdles, it’s very expensive.

VICI also has very predictable cash flow.

They use long-term, triple-net leases (often spanning 15 to 40 years).

These make the tenants are responsible for all property taxes, insurance, and maintenance.

There is a concentration risk with so many of VICI’s properties being in Las Vegas.

But they are expanding to other areas and types of properties like Great Wolf Lodge Indoor Water Parks, Luck Strike Bowling, and the recently purchased Club Med in St. Croix.

4. Tractor Supply Co. ($TSCO)

How does Tractor Supply make money?

Tractor Supply is a rural lifestyle retailer supplying recreational farmers, ranchers, and rural homeowners with agricultural and property maintenance products.

Tractor Supply specializes in heavy, bulky, and costly-to-ship products like livestock feed, fencing, and large tools.

Customers strongly prefer to buy these locally, which makes their network of more than 2,400 stores more valuable, and protects them from online competitors.

Management has a proven track record of generating a Return on Invested Capital (ROIC) between 15% and 20%.

The stores have a very loyal customer base, with 40 million people participating in their Neighbors Club loyalty program.

These members drive roughly 80% of all company sales, carry a 97% retention rate, and spend three times more than non-members.

It’s hard for a retailer to have a real moat, but I think Tractor Supply does.

There’s evidence of it in the ROIC and the strong Dividend growth record.

The Top 3 August Best Buys

The top three spots on this month’s list are reserved for premium members of Compounding Dividends.

However, I just published a full breakdown of the business sitting at the #3 spot.

Become a free subscriber below and I’ll show you where to find it.

Subscribe now

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Our investable universe currently contains 157 stocks rated ‘buy’.

Last month there were 176.

Let’s look at this month’s Buy-Hold-Sell list update and see what interesting opportunities we can find!

Subscribe now

Buy-Hold-Sell List

The Buy-Hold-Sell List filters our very large Investable Universe.

We look for cheap Dividend Stocks based on three valuation methods:

1. The PEG Ratio

2. Current Yield vs Historical

3. Reverse Dividend Discount Model

Based on this, we give each company a Buy, Hold, or Sell recommendation.

Update July 2026

Some Interesting Stats:

• 157 companies total receive a ‘buy’ rating

• That’s down from 176 last month

• And 173 the month before

• 21 moved from ‘hold’ to ‘buy’

• 32 have moved up from ‘sell’ to ‘hold’

• 1 made the jump from ‘sell’ directly to ‘buy’

Recommendation Changes

31 companies went from Buy to Hold due to increasing stock prices.

Here’s a sample of a few:

• BlackRock (BLK): A leading global investment management corporation. As the world’s largest asset manager, their massive scale and diverse platform (including the iShares ETF brand) drive steady fee-based revenue and strong free cash flow, translating to highly reliable shareholder returns.

• MarketAxess (MKTX): Operates a leading electronic trading platform for fixed-income securities. Their powerful network effect connects thousands of institutional investors and dealers, creating deep liquidity and a strong economic moat. This highly scalable, asset-light digital marketplace generates industry-leading profit margins and robust free cash flow.

• Paychex (PAYX): Offers integrated human capital management solutions for payroll, benefits, and human resources. Their highly scalable, asset-light software platform benefits from high switching costs, generating strong margins and resilient free cash flow.

Here's what paid subscribers get access to in the rest of this issue:

• Undervalued Growers on the Reverse DDM

• 33 High-Conviction Cannibal Stocks

• Top High Yield Opportunities & REITs

• Full Portfolio Status & Recent Additions

Community Question

With 31 quality dividend growers moving up from ‘Buy’ to ‘Hold’ this month as valuations stretch, how are you allocating new capital right now?

1. Buying high-yield/defensive names that haven’t run up yet.

2. Focusing strictly on dividend growers trading at fair value or better.

3. Letting cash build in short-term yield while waiting for better entry points.

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

The series where I teach you 5 things about dividend investing in less than 5 minutes.

Subscribe now

1️⃣ Cash Flow Drives Everything

Dividend growers have outperformed the market since 1973.

Why?

Because companies can only keep raising dividends if they keep generating more cash.

Producing more cash makes those companies more valuable over time.

In the end, cash flow is what drives returns.

2️⃣ The Market Is Focused on the Wrong Thing

Cash flow creates long-term value, but nearly 1 in 3 options traded today expires the very same day it’s bought.

Instead of focusing on growing businesses, many investors are betting on day to day price movements.

That’s gambling, not investing.

3️⃣ An Investing Quote

Technology has made investing easier.

But it’s also made gambling easier.

With trading apps, zero-day options, sports betting, and prediction markets, it’s only a tap away.

And someone (other than you) makes money on every trade or bet.

Warren Buffett has even talked about this problem.

4️⃣ The Cathedral and The Casino

At the 2025 Berkshire Hathaway meeting, Buffett compared the U.S. economy to a cathedral with a giant casino attached.

The cathedral represents real businesses generating profits and cash flow.

The casino represents people gambling and speculating.

His message was simple:

Build wealth in the cathedral.

Don’t get distracted by the casino.

Watch the clip below:

5️⃣ Example of a Dividend Stock

Let’s look at a business Buffett would think is part of the Cathedral.

MSA Safety sells real, tangible safety equipment like firefighter breathing apparatuses, gas detection systems, and industrial hard hats.

They also earn repeat revenue from replacement filters, batteries, sensors, and maintenance services required to keep the gear safe and compliant with safety regulations.

That’s how they’ve raised dividends for 59 years.

Key numbers from Fiscal.ai:

• Profit Margin: 15.2%

• Forward PE: 19.4x

• Dividend Yield: 1.2%

• Payout Ratio: 28.5%

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

What makes this deal especially interesting is the buyer: Warehouses De Pauw (WDP), a company I’ve highlighted in previous Best Buys articles.

Let’s dive in to the deal and see what it means for Argan SA shareholders like us.

If you want to read the original Argan SA Investment Case, subscribe for free, and get instant access:

Subscribe now

The Merger Terms

WDP’s CEO Joost Uwents is calling this a blending of companies.

Argan’s CFO described it as the two companies “merging and combining” to create a win-win for both sides.

It’s obviously a friendly merger, here’s what we’re getting for our Argan shares:

• 3 WDP shares for every 1 Argan share held.

• €11.00 in cash per share, paid before the deal closes.

• That a €79.22 total implied value per Argan share

  • A 21% premium over pre-announcement prices

• Expected Dividend Step-Up: We’ll also get a 6% dividend increase based on forward management projections

  • My math says that should be a 12% increase based on current trailing payouts

Is It a Good Deal For Us?

Let’s look at why management thinks this deal makes sense.

They make 4 main claims:

Strategic Fit

Both companies are still run by the founding families (the Le Lans for Argan, and the De Pauws for WDP) and both are entrepreneurial and growing.

Working together does seem to make some sense, so I’ll agree with them here.

Leadership and Scale

Scale matters in logistics real estate.

• Big tenants like Amazon or Carrefour prefer to work with one company that can lease across multiple countries

• Owning properties across multiple regions also creates more opportunities to lease additional properties to existing customers.

• A larger portfolio also lets the company spread its fixed costs across more properties.

• Generating more cash flow lets you grow with less debt or equity issuance

The merger will create a €13 billion portfolio across eight countries.

Argan dominates France, and WDP is very strong in the Benelux (Belgium, the Netherlands, and Luxembourg) region and Romania.

That gives the combined company assets across Europe’s busiest transport corridors.

Combined Growth

WDP wants to expand across Europe, and buying Argan’s French properties makes a lot of sense to help them with that.

Many of the main transport routes across Europe run through France.

The next places WDP plans to expand to are Italy and Spain, which would help them further connect Europe.

It also creates the opportunity to grow a lot within France.

WDP has €700 million in annual self-funding capacity.

Argan owns a 750,000 square meter landbank within France, where access to capital was the main thing slowing down the development.

Management thinks the combined company will be able to double the pace of development of that land.

Credit Quality

I think this is the weakest argument that management made.

They’re pitching the merger as a way for Argan SA to upgrade its credit rating and lower the cost of capital.

WDP does have a much larger balance sheet, and investment grade ratings of A3 (Moody’s) and BBB+ (Fitch).

Argan SA has a lower, but still investment grade BBB- credit rating.

I’m not sure that’s as big of a deal as they’re making it out to be.

The thing that I do like is that the deal is expected to grow the EPS and Net Tangible Assets (NTA) enough that the Loan-to-Value and Net Debt/EBITDA numbers hardly change.

The combined company is expected to maintain WDP’s high credit ratings.

Is It a Good Deal For Us?

The deal gives us much more diversification.

We’re going from concentrated in France to owing assets across eight different countries.

Management is also projecting a DPS that’s > €1.60 by 2030.

It’s currently €1.29, so that implies a CAGR of around 5.5%.

Our starting yield on Argan was 5%, so if management can grow the divided by 5.5% per year, that should give us a 10.5% return per year over the long-run.

I’d be happy with that!

Another great thing is that Argan’s brand and local management team will remain in place and continue running the French operations from Paris.

So we’re keeping the same, well-run French REIT, adding on WDP’s assets, and getting paid a premium for it.

I think this is a good deal for us!

A Few Words on WDP

I’ve pointed out WDP in the Best Buys articles in the past because I think it’s also well run, has a history of growth, and because it was (and still is) reasonably priced.

Let’s look take a quick look a little deeper into Warehouses De Pauw.

Family Run

Just like Argan, WDP still has the founding family involved.

The De Pauws still own nearly 20% of the company through their RTKA family structure.

Isabelle De Pauw is also a non-executive director on the company's board.

She is also the daughter of Tony De Pauw, who was the co-CEO of the company along with Joost Uwents from 2010 to 2025.

After the merger, the company will remain family owned.

• The De Pauw family will own 14%

• The Le Lan family will own 9%

This keeps plenty of skin in the game for the families and aligns their incentives with ours.

History of Growth

WDP has a history of consistent growth in Revenue and Dividends Per Share.

We already know they have a solid balance sheet, and they maintain a conservative Payout Ratio.

That tells me that management is conservative, and we’re not adding a lot of leverage or risk here.

I also like that WDP’s management is looking at Argan’s “AutOnom” standard as an asset.

This is their system to develop net-zero, energy-efficient warehouses.

Tenants will pay a premium for these warehouses for two main reasons:

1. Companies like Amazon and L’Oréal have “Net Zero” targets, and AutOnom warehouses help them meet them

2. It reduces the the energy costs for the warehouses, which the tenants typically pay

WDP management said that they want to learn from this standard and potentially scale it across their portfolio.

This is another way the combined company could grow, and it would protect the whole portfolio from future environmental regulations.

Conclusion

We’ve seen a number of mergers and buyout offers in the REIT space, as well as outside of it (think about companies like PayPal or Wendy’s).

I think there’s a lesson in here.

Stock volatility and dislocation in price from intrinsic value is becoming a new normal.

Companies with cash, overvalued stock, or strong balance sheets, like WDP, are using this to buy high-quality assets at a discount.

As investors, we should be doing the same thing.

We buy stocks like businesses, so we should keep using market volatility to buy up high-yielding, growing companies at attractive prices.

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Sometimes it is, but sometimes it’s a good business undergoing a change that the market hasn’t recognized yet.

If you can find one of those and be patient, you can get paid very well to wait.

Obviously the income from a high yield stock is interesting, but that's not the only reason to consider investing in one.

High yield stocks also perform very well overall.

Companies in the top 40% of dividend yields outperform the S&P most often:

I think there are two major myths when it comes to high yield investing.

Myth 1: High Yield Means A Company is Paying Out All Its Earnings

A lot of investors believe that a high yield stock is a company that’s paying out nearly all of the earnings in dividends.

But that’s not necessarily true.

The 20% of stocks with the second-highest dividend yields have an average payout ratio of less than 50%.

That leaves plenty of cash in the business for things like operations, investing for growth, etc.

Myth 2: High Yield Stocks Are For People Who Need Income Today

Another common belief is that high yield stocks are for people who need the income soon.

The idea is that if you don’t need income today, you should buy a dividend-growth stock instead.

Dividend growth investing is a great strategy, we love it here at Compounding Dividends.

But it’s not the only way to grow your passive income.

Buying a high yield stock with low growth and reinvesting the dividends can work well too.

If you’d have invested $10,000 in Verizon 10 years ago, here’s how things would have looked with and without dividends reinvested.

You end up with about $1,500 more if you reinvested your dividends.

Doesn’t seem like much right?

Look a bit closer - look at how many shares you own in each scenario:

• Dividends reinvested: 314.93 shares

• Dividends not reinvested: 183.49 shares

Think about what that means for your income.

Verizon currently pays $2.83 per share, so here's the income per year in each scenario:

• Dividends reinvested: $891.25/year (314.93 shares * $2.83)

• Dividends not reinvested: $519.27/year

Your income is 70% higher when you reinvest your dividends.

That’s because even though the business, and dividend payment didn’t grow that much, your ownership did.

In Part 3 of our earnings update, paid partners will get an earnings update on three businesses in our High Yield portfolio that are undergoing changes we’re getting paid to wait on.

📊 Community Pulse: How Do You Handle High Yield?

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

Investors have been very optimistic about the AI companies and the infrastructure they need, like data centers and power.

But they’re also afraid that AI might disrupt other companies, like software, or that it could cause high unemployment.

That’s led to interest in another type of stock - HALO companies (Heavy Assets, Low Obsolescence).

The idea is pretty simple.

Buy businesses that own a lot of physical assets that are difficult to replace or copy, and ones that provide essential products or services that won’t be disrupted by AI or the next new technology.

This includes companies like:

• ExxonMobil that owns huge amounts of oil reserves and the infrastructure to recover it, refine it, and get it to market

• WasteManagement that owns the landfills and the routes that help the U.S. dispose of trash

• Vinci S.A. that manages a network of toll roads and airports

AI won’t change businesses like these.

In fact, AI could help make them more efficient and make them more profitable.

Roundhill Investments launched a HALO ETF (LHOA) that’s outperformed the S&P 500 since it launched in May.

Here’s the top 10 holdings to give you an idea of the kinds of stocks it buys:

Premium subscribers will recognize some of these stocks.

We bought before the HALO term was even coined.

Dividend investors naturally end up owning some of these types of businesses.

• The heavy assets generate reliable cash flows and make the businesses hard to compete with

• The low obsolescence lets them grow their dividends for decades

AI can help create software that costs almost nothing to copy and distribute.

But it won't help much if you’re trying to build a portfolio of commercial real estate like Realty Income.

Premium subscribers are getting earnings updates on three HALO companies.

But for the free subscribers, I thought it would be good to give you a framework to see how your portfolio stacks up on HALO companies.

📋 Check Your Portfolio: What’s Your HALO Score?

You can run each company you own through this three question screen.

1. Replicability: If a new competitor raised $1 billion tomorrow, could they duplicate your top holding’s main physical assets in under 3 years?

   (Yes = Low Assets | No = Heavy Asset)

2. Essential Demand: Will customers still need this exact product or service during a severe recession or a major tech shift?

   (Yes = Low Obsolescence | No = Disruption Risk)

3. Cash Conversion: Does the company generate enough real, operational cash flow to fully fund its operations and payout without relying on constant debt or share dilution?

   (Yes = Dividend Safe | No = Dividend at Risk)

Need Some More Ideas for HALO Stocks?

I’ve put together a free guide featuring 10 top global HALO dividend stocks across energy, utilities, real estate, and transportation, complete with their current yields and payout ratios.

Download 10 Global HALO Stocks Here

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.

But if you don’t need the income today, dividend growers can give you a lot more cash in the future.

Today we’re going to look at the earnings updates of 3 stocks with secular tailwinds that should be able to keep growing their dividends for a long time.

Subscribe now

First, let’s look at an example of why dividend growth can be so powerful.

If you invested $10,000 into Lowe’s ($LOW) and Verizon ($VZ) in August of 2016, here’s what that would have bought you:

• Lowe’s (LOW): 122.37 shares (at $81.72)

• Verizon (VZ): 186.39 shares (at $53.65)

The dividends would have looked like this:

• Lowe’s (LOW): $1.26 (1.54% yield)

  • Yearly income: $154.19

• Verizon (VZ): $2.27 (4.23% yield)

  • Yearly income: $423.10

Over the next 10 years, Lowe’s dividend grew 7.5x (!) faster than Verizon’s.

So if you just bought and held, here’s how your income would have grown:

By 2024, the Lowe’s investment was generating more income than the Verizon investment because of the strong dividend growth.

Even more impressive is the yield on cost:

Lowe’s:

• Bought at: $81.72

• Current DPS: $4.80

• Yield on Cost: 5.87%

Verizon:

• Bought at: $53.65

• Current DPS: $2.83

• Yield on Cost: 5.27%

The Power of Secular Tailwinds

A secular tailwind is a big, long-term shift that keeps an industry growing.

Think about the aging population, the global rise of the middle class, or the transition to digital payments.

These things are structural changes that will last decades.

And when a company has one behind it, growth is much easier.

Amazon is an amazing company.

Between 2014 and today, the stock has grown at 23% per year.

But it had the secular tailwind of e-commerce sales growing at 16% per year behind it.

That growing trend is your friend.

Investing in a company that’s active in a growing market is better than buying one in a mature industry.

It’s even better when you invest in one that can also gain market share within that growing market.

📊 Quick Reader Poll

I’m always curious to see where the Compounding Dividends community is allocating their capital.

One Dividend At A Time,

-TJ

Used sources

• Interactive Brokers: Portfolio data and executing all transactions

• Fiscal.ai: Financial data

Disclaimer

As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.