As I’ve been expecting for years, the world is now flocking toward World Dominating stocks…

Right now, investors are fleeing bank stocks and mining stocks… the kind that tend to be very speculative.

But most every “World Dominating Dividend Grower” (WDDG) stock is holding up just fine these days.

While the market is sinking, stocks like Coca-Cola (KO) and Wal-Mart (WMT) are near yearly highs.

[ad#Google Adsense 336×280-IA]I’m not surprised…

As I’ve been saying for years, these stocks are different from typical stocks.

They are different from “the market.”

WDDGs are vastly better.

If I could teach investors just one thing, it would be how to identify and value a World Dominating Dividend Grower business. It’s the single-best way to get rich in stocks…

Let’s use Microsoft (MSFT) as a “case study”…

Microsoft is the World Dominator of personal computer software.

Its Microsoft Windows and Microsoft Office products enjoy enormous market shares of approximately 90% worldwide.

So all over the world, whenever someone buys a PC and needs an operating system and office productivity software, he buys Microsoft nine times out of 10.

Nothing dominates its market the way Microsoft dominates PC software.

Even Intel’s (INTC) share of the global microprocessor market is “only” 80%.

In other words, it has an extraordinary brand, and it is No. 1 in its industry. Those are “on the surface” clues to finding these stocks. But we also need to look inside the company… to find the financial clues of a WDDG business.

To say Microsoft has all the financial clues of a World Dominating Dividend Grower is the understatement of the year…

One of the hallmarks of a WDDG stock is consistently thick profit margins. This is the amount of money a company earns from each dollar of sales. A great business should have thick profit margins, so it can pay you plenty of dividends… but that company should also have a sustainable long-term competitive advantage so it can consistently earn those thick margins.

Well, Microsoft doesn’t merely have consistently thick profit margins. It has the thickest margins of any business I know of, with gross margins (the margin earned before deducting the basic costs of doing business) consistently around 80% and net margins (the margin earned after deducting all expenses) consistently around 25% – after taxes.

That’s huge. Most businesses are ecstatic to earn net margins of 5% or 10%.

Another hallmark of a World Dominating Dividend Grower is huge free cash flow. Free cash flow is the final “cash in hand” number that a business owner has after deducting expenses. It’s a vital number for investors.

Microsoft gushes free cash flow like no other business. On sales of just over $73 billion, Microsoft generated just under $27.5 billion in free cash flow the last four quarters.

A third sign of a World Dominating Dividend Grower stock is a strong balance sheet. As shareholders of a business, we want to see lots of valuable assets and low debt. We want a strong balance sheet so we don’t have to worry about tough times causing a bankruptcy.

Microsoft’s balance sheet isn’t merely strong. It’s a financial fortress. The company has $59.5 billion in cash and short-term investments and less than $12 billion in debt. It could afford to pay off its debts nearly five times over. Microsoft has zero interest net expense because it earns more interest on its cash and investments than it pays on its debt. Sales could go to zero, and this company wouldn’t go bankrupt. It doesn’t get much safer than that.

Finally, for a company to qualify as a WDDG, we need to see a history of dividend growth. Microsoft is a relatively young dividend-payer. But what it lacks in history, it makes up for in growth.

The dividend has grown 150% since Microsoft initiated it in 2003. So the dividend has grown at about 10.9% per year for nine years… That number jumps to an even more impressive 12.4% if you look at the last five years alone. And it’s accelerating recently, with a 25% increase last fall…

Microsoft pays out less than 30% of its earnings per share. So there’s plenty of room for big dividend growth in the coming years. Right now, Microsoft yields 2.6%. Even if it merely maintains its growth of 12.4% per year, you’d be making 27% over your original cost in 20 years.

To sum up, there are obvious things to look for when you’re after the world’s safest, best dividend-paying stocks… the kind you can hold for decades and get rich. This includes a dominant brand and the top position in an industry.

But today’s essay shows you some vital “financial clues” for finding these stocks… and why Microsoft (MSFT) is a great example.

Good investing,

Dan Ferris

P.S. In my latest issue of The 12% Letter (published a few days ago), I told readers about my two favorite “World Dominating Dividend Grower” buys right now. With a subscription to The 12% Letter, you can access this issue… and my materials on how to find WDDG stocks. You’ll also find my proprietary list of these elite companies… and the right price to pay. If you decide this information is not for you, we’ll refund 100% of your subscription. You can learn more about The 12% Letter in this video.

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Source: Daily Wealth