Passive Income Class #2: Use Stock Renting To Add 9-15% To Your Portfolio

Morning, everyone. I hope you'll forgive my tardiness. I am testing out my new studio here at CAP headquarters. So give me a heads up that you can hear me loud and clear that you can see me loud and clear that this window is not. This window is not blasting in your eyes. So give me a heads up that we are all good. Open this up a little bit more.

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Good morning. Good morning. Thank you. Thank you, Chantal. Thank you, Zoltan. Hey, Monica. Hey, Alexandros. What's up, Drew? Drew Hitchcock is in the house.

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Another Alex and Curtis. So green room's totally full. Probably can't get in. Hopefully we'll get to you today, guys. You made a really good decision coming today. So how many of you give me a yay or a nay in the comments? If you watched last week's training on dividend paying stock. Thank you, Alec. Thank you, Alex.

All right. Good, good, good, good. And how's your brain? How's your brain after last week?

I totally forgot our rule. Hold on, everybody. Pause. Ryan messed up. He's all excited about his new studio. He forgot the rules. Okay. Because we do something around here that makes stock market better. We do something around here that makes your passive income go up. We do something around here that makes your business sales go up. That makes Amazon Prime Day even bigger. It even solves political divides in countries. And it's something that brings everyone together and brings collaboration among capitalists is something that we call the simultaneous sip. We ripped it off from Scott Adams. So if you'll join me now, grab your cupper mug, a glass of chalice of stein and tangled a thermos. A vessel of any kind could be a flask if you're that kind of person and join me for the simultaneous sip. Go.

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Scott says it was a big session. Darren says he's been studying it. David is wanting more on this. Monica has been investigating this. Good. So it's a life changer if you let it. It's really a life changing idea of investing in dividend paying stock in the way that we discuss together, in the way that we outline together as a community. Today we're going to take it up a notch. So I gave you a preview on this last week that what we're going to do today is we're going to juice up Your returns by 8 to 15 ish percent. So there is a way for you to just turn up the dial on your returns which is.

Sounds scammy.

Totally, totally normal. And you're going to understand it when I share this with you. So when you combine these strategies together, magic can ensue. So I am going to share my screen with you.

And we'll do this. So this is a strategy that.

There we go. This is a strategy that I call stock renting. And stock renting is a way to add an additional 8 to 12, 8 to 15% per year on your returns without ever selling the stock. So even if you don't sell the stock, even if you, even if you don't ever make a trade, meaning you don't exit the stock, you're still adding that additional 8 to 15 ish percent depending on how aggressive you want to be using this strategy. So the standard disclaimer I like to say in all this is I'm an idiot. Look, I'm an idiot on the Internet. You shouldn't listen to anything that I say. This is entertainment purposes only. I'm just some dude who you follow for some unknown reason. So don't take this as financial advice because I'm not a financial advisor and actually a lot of financial advisors disagree with my methodology behind this. So what the heck do I know? Get help from somebody who actually knows what they're talking about. I'm just an entrepreneur who studies this stuff because entrepreneurs invest differently than most people. Alright, so let's recap. Last week, last week we talked about dividends and the big idea behind dividends is that we only invest in stocks that have raised their dividend every year for 10 years or more. They're called dividend aristocrats. So we want to buy at today's value and we want that dividend to go up every year, every year. We want to be making more and more passive income without us having to buy more stock. We want that passive income going up every and that comes from that company raising their dividend. We only buy stocks that have a day one return of 3.5 to 4% because that's enough meat on the bone day one for us to justify that investment. And we'll time that by buying on bad news. So that dividend is kind of our buy signal. That dividend is when we know that this is undervalued and it's time to buy this stock. And that usually happens on bad news. Bad news that happens once a year, once every two years, once every three years. But because we're having a watch list of 12 to 20 stocks, we can one of them is usually in buy range and we've gone over a couple of them on this class. Rule number three is we only buy stocks with existing profits so that we know they'll continue to pay the dividend over time. And rule number four is that we reinvest the dividends for compound growth over time. So that's our recap from last week. If you missed last week's class, go into your members area and grab it. Also reminder that you have a class all about investing in passive income in your members area. It's called the millionaire class that goes into this stuff into a lot of depth.

Now there's a problem. 4% kind of sucks. Like 4% just isn't that exciting. It's not that exciting to buy something that is getting 4% yield when everybody on the news is talking about bitcoin going to 100,000. It's hard to justify buying a stock that's getting a 4% yield when you could put that money into something else that's going to grow hopefully by 10% or 20% or like a lot of stocks in 2020 after Covid doubled or tripled. So how do you justify 4% when it kind of sucks?

I mean, the question that often comes up is I know it compounds over time, but can't I do something about it right now to make my returns more exciting? The answer is yes. And it's something that I call stock renting.

So stock renting is simply the ability to rent your stock for cash flow without selling the stock. Now, if you are familiar with this, the technical name of this is called covered calls. So if you research this further or buy books on this or read blogs about it, the technical name is covered calls. And this is the first strategy that I learned in my investing Career that showed me, oh my goodness, like, this gets real good over time. This gets real exciting over time. And back then, you know, this was. I was 14 years old because I'm a nerd like that. And I was reading books from the library and reading everything I could about how to generate 10 to 15% in cash flow from this. And that was the only part of the strategy that I knew. Now I'm a little bit older, a little bit wiser, and we combine this with other strategies and the numbers get pretty freaking exciting over time.

So the stock renting is simply the ability to rent your stock for cash flow and you don't have to sell the stock. So you might be familiar with the idea of rent to own. Rent to own on pretty much anything. You can rent to own a house, you can rent to own a, you can lease to own a car, you can rent to own furniture. You might be familiar with this of renting to own. Well, when you're renting something to own it, you pay a monthly fee and you have the option to buy that item at the end of the lease period, right? With a house, you might have a rent to own option for one year, and at the end of that year you have the option to pay that, to buy that, to buy that item. Now this is the important word right here.

The predetermined price. Make note of this. In a rent to own situation, you are buying or selling the option to buy it at a later date at a predetermined price. So here's an example. Let's imagine that we're doing rent to own on a home. You might, you would. The first step, like step number one on this, is that the price is determined up front.

So you go into the agreement with a predetermined price of that house. So we say that that price is $100,000. In this example, the renter has $1,000 a month that they're going to pay in rent and they're going to put down a $1,000 option payment, which is just giving them the right to buy this at the end of the year. And then at the end of the year, they have the ability to buy that house for $100,000.

I know we're not taught this is just an example so that you can get the concept of this, but are you with me so far? You get the idea of renting to own, having the option to buy something at a predetermined price. Let me know in the comments.

Comments are not coming in. So you're really Confused. If you're really confused, let me know that you're confused.

Alec and Alex, I know you're intently watching. Are you guys with me so far? Give me a thumbs up or thumbs down. Thank you, Alec.

Okay, good.

I can't quite see what you got.

All right, Alec is fact checking me. He works for the government, it looks like.

All right, Monty's confused. Tell me where you're confused.

Okay, so question. Does the $1,000 option count towards the hundred thousand at the end of the year in our case? No. And I'll give you a couple examples on this in a second.

Okay, good, good, good, good. I like this. I'm not confused yet. Stick with me. All right, so.

The rent to own concept we can do with our portfolio. Now, why would someone do a rent to own option? Why does this exist? It exists for a couple reasons. One, it exists for certainty, gives you the option to buy something. So you lock in your decision now, and this is supposed to say while letting things shake out.

So you can lock in the option to buy something, so you have that decision now, and then you can kind of let things shake out so you have control over a scenario without being beholden to it. Sometimes people go into a rent to own or an option scenario because of a financial situation. They have the option to buy something and it gives them time to get into a different financial situation so they can complete the transaction or walk away from it.

There are people who speculate on this. They buy options as a form of market speculation to make money. Now, let me give you a couple examples on this. The first. First one is in January of this year. I bought a new home. And that home was in a city area. It was in one of, like, the bustling areas of Austin, Texas. It was actually in one of those like. Like it was a. A home in a shopping center in a really active area of town with a bunch of. There was a movie theater and restaurants and whole Foods. And we loved the idea of being able to walk out our front door and being in a busy area and taking my daughter to the movie theater that was right across the street. We were really excited about this idea. And it was a new build. The house had not been built yet, so we were building this house from scratch. And so we put down a $10,000 option on this house. And so what that meant was that we now owned. Owned that decision. Nobody else could come in and buy that house. And then we worked with the. With the person who was building it to go over all of the specs. Of the house. We wanted to look like this, and we want to look like this. And then what happened? Two months later, quarantine hit. Covid got really bad and the idea of living in a really bustling part of town lost its appeal. So we backed out of the transaction. And in doing so, we gave up our $10,000 option. We gave it up, we lost it, alright, So I lost $10,000.

But I didn't buy a house that I didn't want long term.

So I put the option down to secure it. Things changed, life changed, the area changed, and we no longer wanted the house. So we backed out, gave up our ten grand. But in the long run, good decision. Good decision for our family anyway. So that's one form of why an option makes sense. In the second example, option two, people bought options during COVID and made a full fortune. So if you had bought at the bottom of COVID right in, in March, April of this year, when the stock market went kerplunk, one of the options that you could have done was to, instead of buying stocks, you could buy options on stocks. You could buy the ability to buy it without putting your whole portfolio play. Now what would that have done? It would have given you the right to buy all of these stocks. And then when the market goes back up, you're in the position where you've already created the ability to buy at that predetermined price. So if an airline went to 10 bucks, like many of them did, and now they're at 30 bucks, you already bought the other option at 10 bucks, which means now you own a $30 stock for $10.

So you see this, this is the control piece of it. This is why people buy options on houses, on cars. You can buy an option on a car that you're leasing, because if you really like it for a year, you can buy it.

So that, that's the option piece of it. That's why people do this. So it's important that you know this, so that you know what's going on behind the scenes as you are doing exactly what we're going to cover together when you're renting your stock.

Now, we can rent to own our stocks, the ones that we own, and generate an additional 8 to 15, 15% per year on our existing portfolio. So what we're doing is we're, we're selling the option to buy our stocks and we're getting paid for that on a monthly or quarterly basis.

So you don't need to understand how yet. I just want you to know that that's the psychology and the strategy behind this. Now before I show you how to do this, let's go over a few rules.

The rules on this are we only do this on stocks that we want to own and preferably already own. So this is a way for you to generate additional passive income on the dividend paying stocks that you own.

So what that means is instead of 4%, you can be getting 12% or 15% on the money that on the stocks that you own, which makes this a lot more exciting. So we only do this on stocks we want to own. We never ever, ever buy stocks just to do this. We only do this to create additional cash flow on the stocks that we already want to own.

Salameh will go over how anybody can do this and how much cash you need, but it tends to be about $2,500 in order to start.

Someone says they did this with Etsy in March and they tripled their investment. Good work. Rule number two, we only do this in packs of 100 shares. We can only do that. So you have to own 100 shares of a company to do this. So if a stock is $25, then you need to have $2,500 in play.

Our target rent is 1% per month because that ends up being 12% per year.

And we set our expiration date, meaning the time in which it takes for.

For this to complete, between one and three months.

Now this last rule is very important. We never want to sell the stock, but it's okay if it happens. If it happens, it means that we're going to turn a really great short term profit. We're going to turn a great short term profit. It's not the best thing in the long term, but we'll take that profit and we'll put it into the next dividend paying stock. So it's not a big deal if you sell the stock. But that's not what we want to happen.

So we'll go through some examples and you'll get it, you'll see it. You'll have a braingasm. In fact, take note when you get the braingasm, put it like when you get it, put it in the comments braingasm. So when you finally get it, you'll see some examples. Just let me know so we know when things are popping.

Now let's go through the numbers of this and what makes this exciting.

So this is a real example. This is a live example. It exists right now at and T trades just below $30.

So you need to buy 100 shares of it. That'd be $3,000. They pay a 7% dividend, and that dividend increases over time. So our passive cash flow on this day one would be $210.

We then rent the stock using our stock renting strategy for an additional 10% per year. 10% of $3,000 is $300.

So that's our passive income part of this.

And then the stock, we would expect this stock to grow, on a very conservative side, 5% per year. That's $150, year one. Now, we hope that it grows more than this, but it doesn't matter. If you remember, last week, we talked about how, in theory, you can make more passive income if the stock goes down in value or does not change in value. So we don't really care about what happens to the paper value of the stock.

But a conservative example would say stock market grows on average 6 to 9% per year. So I put it at 5%. That'd be $150. So your total return on this is 22% per year. That's year 1, year 1, year 1, year one.

So that year one is 22% return. Now, here's the magic, guys. Remember last week when we talked about compound interest, that 22% that. That compounds. It all compounds.

It's not just getting an additional 10% per year. It's an additional 10% that can compound.

So in that way.

When you do this.

Where'D it go? Ah, where'd it go? There we go. If you do this, if you reinvest the rent to buy more stock, it becomes the third kind of compound interest.

So now you have a third piece of this.

To compound in your total returns. So last week we talked about how the double compound interest was the real magic to this. Well, if we add on this stock renting piece, we now have a third form of compound interest. And so year one, if we're looking at a 20% return, that's amazing. But year two, it's 25. Paulina says, I'm not sure how you arrived at 22%. So let me show you again the numbers on this.

AT&T currently pays a 7% dividend. That's 7%. We'll rent the stock, and I'll show you how that works in a second for an additional 10% per year. So that's a total of 17%. We expect the stock to grow conservatively at 5% per year. How do we know that? I pulled the number from my rear. But what did I base it on. I based it on two things. I base it on the fact that AT&T is undervalued, and I base it on the fact that the market averages.

6 to 9%. So I just picked a conservative number.

So those two things, those three things together. 22%, add up to 22% year one. Now, we expect that to compound over time. So 20%, 25%, 30%. Holy snap. Are we talking about a 30% return a year that continues to compound? Seems too good to be true. Seems weird. Seems too good to be true on this.

So Alexandra asks if the renter buys the stock option for me. I've got my 10% so far, but the stock's gone up, so I could buy another. I do not understand your question, Alexander, so stick with me until the end and see if this question is gets answered.

All right, let's keep going.

So this is our third form of compound interest. Now, I'm going to show you examples here on the next slide. But first, I just need to cover a few key terms so that we're not confused here. Actually, this is probably what's going to confuse you, but if you get this, it'll make things real easy. All right? The word call. Call is simply the option payment. You can think of like a call in poker. When somebody challenges you in poker, you call. It means you match them. It means you make the decision.

So call is when you.

Give someone the option to buy it.

So had I bought my house from the house example, I would have executed the call. I would have called the house. I would have bought the house.

The premium is your rent payment. Premium is the amount of money you get paid for the rent.

Strike price is the price of the stock, what it's going to execute at. So the house that I bought was $700,000. I would have. My strike price was $100,000, but I did not execute the call. So I gave up my $10,000 option payment. And your expiration date is when the option expires. When does. When does this expire?

All right.

So let's keep going. Let's go through some examples. When you see some examples, you're gonna get it, and then you're gonna be like, oh, got it now. Okay, so remember, this is the same set of examples we went through last week.

So let's just go with unum, this first stock. So we were talking about this inside the 1% when it was trading at $18. That's when we were like, man, this is sexy. It's gone up since Then. But it was trading at 6%. All right, so I'm going to show you my E Trade account.

So I personally own. Wait, Stand by.

So I personally own 2,000 shares of Unum. Just full disclosure, I own Unum. I own quite a bit of Unum.

Now Unum.

Trades under Unm.

Now Unum today, down a little bit. So it's trading around $20.

It's dividend five and a half percent. I know that might be hard to see for you, but we can see it right here. Dividend five and a half percent now at 18. When I, when we were talking about it and I bought it, it was at that's like six and a quarter or something.

So check this out. So Unum has a five and a half percent dividend. I have six here on the slide. I'm going to go over to this options button here.

Options. Now we get this crazy wonky wonk screen. This is enough to give anybody a headache. But let me, let me make this easy for you. What we're doing here is we're picking how long we're going to have the rent period.

So I said one to three months is our target. Right? So let's go out one month.

So this would. This is the contract is until December 18th of 2020. So that's one month from right now. Now check this out right here.

This is, this is the strike price. This is the price that we are willing to sell the stock for.

So the next one out from its current price, right now it's trading right around $20. If we look at this price right here, $22.50, this means that someone would have the ability to buy this stock from us at $22.50 a share, which is higher than what it is right now. It's 10% higher.

And the option payment, the premium that we would make is 35 cents between 30 and 45 cents. So let's split the difference. Let's say it's 40 cents.

So someone do the math real quick and tell me.

What is the percentage? $0.40 into the current price, which is $20. Current price of the stock is $20. We would get $0.40 per share. What is that, a percentage basis? Somebody do the math real quick. I'll give you time. I want. I could do it for you, but I want you to see this. I want you to be able to do this.

So what's $0.40.

Into $20, which is the current price of the stock?

Drew Hitchcock, 2%. 2%.

So 40 cents is 2% of the current value of the stock. So what this means is that we would get a 2% return on our money for one month of letting someone rent the stock.

So we rent our stock for one month. We get a 2% payment upfront, and that money gets deposited into your E Trade account immediately. It comes in immediately. So if you own a thousand shares of this.

You end up getting. What is that? A few hundred bucks. Will somebody calculate that? If you own a thousand shares.

What does that end up being? So you own $20,000 worth. 2%. I think that's $400. So you get $400 deposited into your bank account immediately.

Now, here's what this means. It means you can't sell the stock for 30 days. You cannot sell that stock for 30 days or until that option period is over. So you can't sell it now unless you sell it to the person who bought the option and they determine that. And they would have to buy it for $22.50.

So if it sells, like, if they buy it, cool.

You made a great profit. You made a great profit. But the ideal scenario would be that they don't buy it, the option expires, and you do it again. Because getting 2% on your money.

If you can do that eight times in a year.

You see? You see how exciting that is?

If you can get a 2% premium, if you can get $400 for this eight times.

And keep the dividend.

And buy more stock.

Oh, this gets good. Oh, this gets good.

So Salome wants to know, how do we know.

Whether to do the option? I'll show you in a minute. Whether to do the option one month or three months? I'll show you in a minute. All right, so tell me that you're with me. I know this stuff can be. If this is new to you, this can be confusing as heck.

So tell me if you're getting this. Alec, you're nodding in the green room. You following along?

Thank you, sir. Manny just got it. Good. Manny just got the brain gasm. Alec, how's your brain? Are you doing this? Give me thumbs up or thumbs down.

Alec, give me a thumb. Show me a thumb, Alec. Oh, sorry. I'm talking to Alec. Alex, there's two Alex's and an Alec. Thank you, Alex, for your thumbs. I know. I'm sorry.

All right, Scott's with me. Good, Good. All right. Good, good, good, good, good. You guys are Sue. You're my gauge on this. When you get it, you give me the best feedback on this. So tell me when you really get it you think you've got it. So let me just show you the example one more time.

So unum this first. Actually, no, let's just do another example. That, that will help if I show you another example that will help. Alright, so the, the next example that we went through last week was actually, let's pull up the example. Abbvie. Abbvie is a real. Whoops. Abbvie is a really nice stock that's in buy territory right now. So it trades under ABBV.

So AbbVie, let's take a look at the stock. It's down $1 today.

And AbbVie has a quarterly dividend of 5.3%. We were talking about it in the 1% when it was trading around $80. So this would have been a lot higher, would have been about 6%. But right now it's five, five and a quarter percent. Now AbbVie, now this would be a, this would be a nice, a nice dividend yield, day one. It'd be great to get that. Five and a half, five and a quarter, five and a half percent. That's an awesome start. But what happens when we bring in renting into it? So this is the AbbVie options, the option chain. Now remember, we're picking how long we want to rent the stock and we want to do that between one and three months. So let's look at the one month right here. That'd be December 18, 2020. And AbbVie's trading at $97 right now. Now we don't want to trade it, we don't want to sell it for $97. We want to sell it higher, right? Because we don't really want to sell the stock. So let's look at $100. $100. That means somebody can buy it from us at $100.

And the price, the premium on this is just under $2. So once again, a 2% return.

For about 30 days. Now let's say that, now let's say that you were like, well, 2%'s cool, but, but I don't want to sell the stock for $100 because I think this is going to go way up. What do you do here? What you do here is you pick a higher strike price.

So if we pick a higher strike price.

Let'S say you were willing to sell it for 110, 110, the premium you'd get is only about 25 cents, which is not going to be very much.

That's less than 1%. But what if we agree to make the contract longer.

We go three months. We go into February.

February. Now we're talking February. The 110 strike price, the premium is $1.25 right here. That's better. That's 1%, but it's 1% for three months. So I wouldn't do this. I wouldn't sell this. I would go one or two levels up.

So here, 105 strike price.

Is two and a quarter, which is about 2% for three months. Still not great. But we're getting a little bit more. We're getting a little bit of extra money on our portfolio.

Does seeing a second example help?

Are you starting to get it?

Tell me. If you. When you guys are quiet, I think you're confused.

Because if you get it, you're going, holy shit.

If you're getting this, you're going, holy shit. I can get passive income on my portfolio every month. Every month.

Good. All right. Pauline is getting good.

Yes. Sue. I will do one more example. Good. So another example that we went through last week was Verizon.

So let's take a look at Verizon. Verizon trades under vz.

So Verizon.

Has a dividend yield of 4%. So it's in buy territory right now. So, in fact, all three of these examples are examples I'm tracking right now. Stocks that are in our buy territory based on our rules and our criteria from last week. So 4% dividend yield.

So this is a. This is a nice buy, regardless of what's going on. But what happens when we rent it?

So I hit options chain. Let's go. One month out.

December 18th of 2020.

So Verizon's trading at $60 right now.

The option to buy it at 62.50 is just under 50 cents.

So will someone do the math?

50 cents.

Divided by 6250. What do you get?

Oops. What do you get?

What do you get? Come on. What is 50 cents into 6250?

Oh, it could be that I gave you the wrong numbers. Sorry.

$0.50 into the current price of the stock, $60. So it's $0.50 divided by $60.

It's just under 1%. Just under 1%.

So it's actually like, point. Oh, yeah, there we go. That's like 0.8, 0.8 and a half.

Now, that's not very exciting.

Now, but if we extrapolate that over 10 or 12 times per year now, we're looking at an additional 8 to 10% on our money. What if we go out Another month. What if we go to January?

What's the option payment on this? Now it's a little bit higher. Now it's 80 cents.

80 cents into $60 is.

1.3%. So we get 1.3% for two months. Do that six times a year. Now we're looking at 9% additional cash flow on this stock.

So the numbers shake out to be an additional eight. On the really conservative side, we saw some examples that were 2% for a month, that's 16 to 24%. On the aggressive side, if you get a nice blend, a nice basket of these investments, now you've got an additional 10, 9 to 15% on your money.

That's assuming you never sell the stock. You will sometimes. But remember, when you sell it, you're selling it for a higher price than what it is today. So you're getting a nice profit either way. And you're going to take that and you're going to put that into more stock.

Now let's go over.

What could go wrong.

So what is the downside to this?

Here's the downside. The downside, number one, is that you could get called out. Called out means someone buys it from you. You sell your stock and you'd miss out on some upside.

But you'd still be selling for profit.

So yes, you'd miss out on some upside, but you're still selling for a profit.

That's one downside. The second downside is this stock could fall just like any stock.

Just like any stock can fall, so can this one.

Which is why you only want to do this on stocks that you want to own long term. Because the stock goes down in value, guess what? You get to keep your option premium.

So if, if the stock goes down for 5% this month, some people would have a heart of frickin tack.

But if you got a 2% option payment along with that, you've now offset, offset the downside. You get to keep the cash flow, you get to keep the dividend. And as it bumps back up, you write another call, you sell another option, more cash flow.

So what I like to do, like my strategy on this, and this is one extra layer of complexity if your brain's don't already hurt. But what I like to do is I write, I sell my options when the stock has a bump, when it goes up. So on what really good day? Like two days ago when the stock market went crazy because of good news, that would have been a really good day to write an option. Because if your stock goes from $20 to $23 in a day. It's an amazing day, right? So I would sell an option at $25.

Get my option payments.

Knowing that it's not very likely that it's going to keep going at that torrid pace.

Question. Do other people always buy the calls? No, they don't always buy the calls. If it doesn't cross the strike price, they don't buy it.

Okay, so let's take this home. Let's bring this up now. You will only really get this.

On in when you do it. When you do it, you'll get it because you'll see the money show up in your account. You'll be like, what?

And when you actually see the price on things, you'll get it. So you have to kind of do it in order to get it, just like anything. So let me go over your assignment. Just like last week, you should be having a watch list based on dividends.

So you make your hot list, your watch list of dividends, one place to get them. Review those selections from the recent 1% newsletter and by for God's sake, go through the millionaire class. It's a $5,000 class that is sitting in your members area for free. Like a class that people paid five grand for to learn this stuff in depth. And it's in your members area.

Now inside of whatever trading account you have. I use E Trade. Look up the option chain. Look up what each of the stocks on your watch list have in their option chain and then post in the Facebook group what you discover.

Now, just for fun, just for fun.

Let'S play with some numbers.

So just.

To show you the power of this, let's play with some numbers. Remember, these are fantasy examples. We made these up. But we can't predict the future. Past performance is not an indication of the future. But.

We can make some.

We can run some numbers based on current examples. So let's go with the Unum example. Yeah, let's go with Unum right now. So Unum say you put $10,000 into UNM. We add nothing to our regular. We add no more to that account forever.

We started talking about Unum when it was trading at $18.

Market average increase is usually 9%. Its dividend yield at the time was 6.5%. Let's just say 6 to be a little safe. And Unum tends to increase their dividend by about 10% per year.

So this is just the example of Unum because it was one of the examples from last week. Let's calculate this so $10,000. Does anyone want to guess what $10,000 becomes over 30 years? In this fantasy made up example.

Drew says fake numbers.

Does anybody want to guess what $10,000 becomes over 30 years?

Someone summed up the downside to this very well. That the downside is that you might have to sell a stock that you want to own. Yeah, that's the downside. You might have to sell it for a profit.

Come on. Hey, stick with me. Give me some guesses in the chat box.

What do you, what do you think 10 grand would becomes over 30 years in this example?

Come on, I'm gonna start calling you out.

Okay, we won't. We won't calculate the numbers. Then I guess this is not that much fun. So we won't guess it. So what we'll do here is we'll go over. Okay, there we go. Now they're coming in.

88,000. 1,600,000. They're all over the board.

Let's run them.

In 30 years. This becomes.

$750,094.59 over 30 years, assuming that the current numbers stay consistent, which they probably won't.

But that's assuming that they stay stagnant.

But I tricked you. I tricked you on something because I did not include renting your stock in this. That would just be on dividend growth.

So.

What is it? If we add in covered calls, so if we assume 1% per month on our original balance, we're going to add in $100 a month into this.

So an initial investment of 10,000, we sell covered calls at 100 bucks.

We make 100 bucks a month, do that consistently over 30 years.

Now we're looking at $1.3 million on an original investment.

Of $10,000.

Alec just had a brain gas.

Now, this was based on real numbers, current numbers of one of the stocks we talk about inside the 1%. Let's go through another one. Let's just do another one for fun. Let's do AbbVie.

You know, I don't know Abbvie as well.

So hold on, let me pull up my numbers.

Let's do a more conservative one AT&T. So AT&T.

Their current price is about $28.

Their current yield is 7.5% on their dividend.

We're going to expect a 9% growth of the stock.

Now here's the thing.

They do not raise their dividend very aggressively at all. It goes up about 2% per year.

So that $10,000 over 30 years with these numbers becomes $318,000.

Now if we add in.

The stock renting, it changes a little bit. I'm going to say that we make $200 a month on average from doing this. That would be 2% per month.

We calculate that return.

That $10,000 becomes.

$830,621.68.

Oh, I wasn't sharing my screen. Damn it. There we go.

$830,621.

Let's do one more. Since I wasn't sharing my screen.

Let'S do real numbers of.

Bank of the Ozarks.

So bank of the Ozarks, we started talking about it inside the 1% when it was trading around $25.

Their yield at the time was about 5%. Might have been 4 and a half. We'll just use 4 and a half. To be conservative.

Bank of the Ozarks raises their their dividend on average about 10% per year.

We're going to expect a 9% increase. We're just going to keep that standard.

$10,000 into bank of the Ozarks. These are real numbers. Based on recency, $10,000 becomes $500,000. Almost on the nose. $500,952.79.

This does not include the stock renting. So let's put in the stock renting. If stock renting gives us.

$200 a month.

Let'S make it 150 just to be safe. Calculate that return.

If we add that in, we're now at $1.1 million.

From an original investment of $10,000.

Do you see now why one of the rules.

Is to take 10% of your take home money and put it into long term dividend paying stock? Can you imagine what would happen your financial future? Have you put 10% of your take home pay into dividend paying stock every year? Ugh. If I could get people to do one thing it would be follow the strategy.

Okay, I'm gonna conclude there and go over to the green room for questions. If you want to talk about your business or talk about this strategy or how it applies to you, then come on into the green room. The link is inside the members area or inside of the Facebook group. Click that link, it'll put you in here and we'll go through whatever you need. So Alec, you have been active on this call. Do you have a question that you want to run by me? If so, give me a thumbs up and I'll bring you live. Alright, you know you're good. Okay, cool. How about Alex? Alex, do you want to come on live? Do you Have a question for me or are you just hanging out in the green room? Give me a thumbs up if you want to come on live. Or just give me a thumbs down if you're good. Hanging out in the green room. Okay, he's good. So, Mario and other Alex, you're in queue. If you want to come on live, please turn on your cameras and your media so that I can see you.

So question. Is the idea to do this every day in the stock market. No, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no. Once a month max.

Like.

You, you, you. You are not doing. You are not day trading this. You are simply renting your stock once a month max. Remember, our option periods are one to three months.

So all we care about is going in there for like an hour a month and generating this. That's it. That's it.

I love this question. What the hell have I been waiting on? Yep. How realistic are the estimated returns? Great question. So the examples that we went through are real examples. They're examples that.

Exist right now.

The assumption is that the stock will increase on an average pace, which it won't. It's gonna have up years, it's gonna have down years. It's gonna have. It's gonna have years that it goes up 15%. It's gonna have years that it goes down 2%. We just can't predict that. But market average is 9, 6 to 9% per year. So was just played with that number and assume that it would be static. Now, the other assumption is that the company will continue to raise its dividend at the same pace that it has for the last 10 years, which it might not. It might more. More might go up more. It might go down more. It might stay the same. So there's some assumptions made in this, but the assumptions are based on recent data. So the trick to all of this, buy stocks that you want to own long term, hold them for a long time, and buy them at the price that secures that dividend yield from day one, and then we juice up the returns by renting it.

All right? So, Chris, you just entered the green room. If you want to run a question by me, give me a thumbs up. I can only see your eyes because of where your camera is, but give me a thumbs up if. If you want to come ask a question.

You're waving at me. Give me a thumbs up if you want to come on live. You're just hanging out in the green room. Okay. Sonny asks if the Stock gets called, do you normally rebuy it right away or do you put it into your pool of funds?

Great question, Sonny. So let's look at an example.

So.

Let'S do this.

Standby, Standby, everybody. I'm making mistakes all over the place.

All right, so look at, here's an example. So I'm just gonna look up.

GPC. GPC is a stock that we talked about inside the 1% for.

During COVID We were like, hey, you might want to look at gpc. Might want to look at this guy. So take a look at this one year chart here.

So we were talking about it right as it was cratering in here. It bottomed at $50. I think we were talking about it when it was at like 65. 60, 65. So in this range right here is when we were buying it. And the dividend on that was like 6% at the time because the stock was 50% of what it is right now. So we were saying we weren't making recommendations, but we were watching it right here when the dividend was really sexy. So let's say we were writing options this whole time. Do do ba doom, boom, boom. We're making a killing. Our stock has doubled in price. We've now got a hundred percent return on our money. We're selling options every month. And then guess what? Right here at $100, we get called out because we wrote $100 strike price. We got our money and we sold. Well, now that the stock's at $100, it's outside of our range. It's out. It's not paying a 4% yield anymore. So we're not rebuying this stock.

We would wait for this stock to come down in price back to our entry point of paying a 4% dividend. Or we would buy something like.

Bank of the Ozarks.

Which we've been talking about, which is just. It just popped out of range, but has been in range for a long time. So we'd buy something else that was in range.

Now in this example of gpc.

Sonny, I'm so glad you asked this question. So if we had bought this dividend paying stock over here and we had been receiving dividends and option payments for this amount of time, and then we sell this stock for $100 after having bought it at 50 or $60.

Our return on this is 100%. We doubled our money. We doubled our money. In that case, are we that concerned that we lost the 4 or 5% dividend? No, we are not. We are not concerned about that. We now just made bank. We made a great profit. So what do we do with that profit? We now use that money to go put it into the next stock that's within range, within our buy signal. Now, if we held it long term, that's great too, because it's going to continue to compound. We're going to buy more shares. It's hopefully going to go up in value. We're going to get more dividends, we're going to write more calls on it. But if we end up selling it because we got called out, we made a profit. Put it into the next stock that's in range.

Question about dividends. Do you reinvest it back into the company? Yes. Always. Always, always, always, always, always, always. Yes. You can set it to automatically do that in your trading account.

Question from Drew. If we. It would only rebuy the stock if the stock was still in the dividend target. Cor. Yes, Drew was ahead of me.

All right, anything else, Chris? You're giving me a thumbs up. You want to come on live? All right, let's do it.

What's up, Chris? Hey, is there an area that you go to see, like year on year where all the stocks rise, like their percentage points? How some rise by the dividend yields by 10% or some. I think AT&T does 2%. Yeah. So I calculate this manually, unfortunately. But here's how you do it. So you just Google the stock's dividend history. So. So I can. I can show you. So if we look at GPC.

Dividend history. Whoops.

So first result is NASDAQ.com.

So we can see here. You see, Chris, do you see these numbers here? Yeah. So in 2017, the dividend was 67 cents. Next year it was 72 cents. Next year it was 76 cents, 79 cents. So they raised their dividend on an average of 3 to 5 cents a year. Does that make sense to you if I say that? Yeah, that makes a lot of sense. All right, so they raised their dividend 3 to 5 cents a year. And the stock trades or the. And the average dividend there is about $0.70. So $0.04 into $0.70 is like a 5%, 7% growth per year. Okay, that makes sense. And that's a really healthy number. Anything over 5% of growth every year is really healthy. Yeah, that sounds really good. Yeah. So that's. That's how you calculate that. Does that make sense? All right, cool. Thanks, Chris. Anything else? Nope, that's it. That was easy. That was easy.

So Lil, question. What if the market goes way down? If you remember from last week, if the market goes way down.

You can A, write options the whole way down and still get cash flow. And B, or 2 or Roman numeral 2.

Is that when the stock's at a lower value? Your dividends and your rent is buying more stock. So you're buying more geese that lay golden eggs over and over and over again. So it compounds and continues to compound. Kyle just entered the green room. Kyle, give me a thumbs up if you want to come on live.

Talking to you, Kyle. Kyle, you just entered the green room. Do you want to come ask a question?

Give me a thumbs up.

You are looking at me with a blank stare, Kyle, going once on. There we go. Hello, Kyle. Hey, Kyle. What's going on? Hey, Ryan. You were cutting out really bad. I was like, what's going on here? Okay, well, what can I do for you, Kyle? So first want to say thanks again. Great, great. Course. I went through the millionaire courses months ago back in the spring and I remember you saying that I think you need to have at least $1,000 to put into a dividend stock. Is that correct? Like to start investing in a digital stock. Well, you can buy one share of anything. I mean you can buy, you can buy one share of AT&T for 28 bucks. But in order to do the stock renting strategy, you need to buy 100 shares. That would be $2,800. So you can own one share of something, you can own two shares of something. You can own 150 shares of something. But, but options trade in hundred share increments. So in order to rent your stock, you need to have an even number of shares. That's 100 shares or 200 shares or whatever makes sense for your portfolio. Nice. So it's never, you can never start too early then. Really? You are exactly right. Okay, cool. I mean if I could, if I could give one person, any person, a strategy that would serve them long term, I would give them this regardless of where they're starting. I mean, I have my team doing this. I have. I mean, one of my wealthiest friends texted me two years ago, two days ago, and was like, I'm pivoting my, my strategy over to what you just taught. So wealthy friends, people that are just starting out in their careers. Beautiful. Awesome. Cool. Thanks, Kyle.

So let's conclude on this question from Leslie. Can this work on value stocks too, like Amazon? The answer is absolutely yes. But the foundation of my strategy is buying long term dividend paying stock that's going to compound over time. So that triple compounding is the foundation of my strategy. And so if a stock doesn't pay a dividend, now I'm speculating and it might be educated speculation, but I prefer getting the cash flow on my portfolio. Okay, team, it's great to see you. Next week we're going to have a class that shows you a way to set things up so that you only buy stocks at your ideal price and you get paid along the way. So even if you don't buy a stock, you can get paid to wait to buy the stock at your perfect price. So if you're disappointed by the amount of dividend paying stocks that are within range right now, you can still generate passive income by waiting to buy the stock for your perfect price. And we'll talk about that next week. And when you combine these three things into this strategy, my God, it's just.

The way.

It'S hard for me to say things because this is investing stuff and I'm not qualified to teach this stuff. So I can't say like this is the way you should do it. You probably shouldn't do anything I say, but it sure excites me. And so those three things in a blender really excite me. And so we'll complete it next week and tie it all in a bow. Alright team, great to see you. Thanks for spending part of your Thursday with you with me. And I'll see you guys in the Facebook group. Post what you find, post your questions, post everything in the Facebook group and we'll continue the conversation there. See you guys.