This crypto ‘utility’ is a generous dividend producer

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I stopped pulling my suitcase and looked for my phone. “Owens.”

“Hey buddy,” I replied to my childhood friend. “If it’s loud… well, I’m in Vegas.” On the Strip, in fact, walking to my hotel to check in.

It was almost 80 degrees. Your income strategist was sweating through his shoes and pants and, more worryingly, he had forgotten his hat, which meant that the increasingly exposed top of his head was slowly but surely sizzled by the desert sun.

But the “shortcuts” to casinos would require a new mask, according to Nevada state law. In addition, they are noisy. And my boy wanted to talk about cryptos, even though he had made very little investments all his life.

“Let’s say I just put a large in Ethereum…” he continued, describing a hypothetical example that I thought was 100% real.

Everyone wants to talk crypto these days. Just the week before, we answered questions about potential Bitcoin games from dividend-focused normally booked subscribers in our last webcast.

Let me repeat what I said then. As an exchange (holding period: weeks to months), crypto is great. We can buy and sell anything with a price, as long as we don’t go overboard.

As an investment (holding period: years), I prefer toll companies that will thrive on the crypto (and general) trading boom. Think of the back-end platforms that profit every time a newbie trader slams the “Buy” button in Robinhood (HOOD), Coinbase (COIN), or good old TD Ameritrade (recently bought by Charles Schwab (SCHW).)

We can think of platforms as the “pick and shovel” suppliers of the current business windfall. The term comes from the entrepreneurs who made real money during the California Gold Rush – the store owners who peddled pickaxes, shovels, alcohol and “entertainment” to gold miners. themselves.

COIN is a bit common for me as a crypto platform. I looked at the lesser-known Bakkt Holdings (BKKT), which doesn’t pay a dividend but is owned by a company that does.

BKKT was founded in 2019 by serial entrepreneur Jeffrey Sprecher. Jeff is our kind of businessman. It fixes the problems and in doing so creates new sources of profit, the kind that doubles its investors’ money every few years.

I also like his style. He puts one foot in front of the other, but the sum of his journey is a gigantic gesture. For example, in 2005 he listed his five-year-old company on the New York Stock Exchange. Seven years later, he bought the entire NYSE.

Its “parent” company Intercontinental Exchange (ICE) returns 1%. Newbie investors see this and yawn, which is a shame for them.

It’s anything but a sleepy dividend because it rises quite quickly and takes the ICE share price with it. The company launched its payout in 2014 at $ 0.14 per share. Seven dividend increases later, the stock’s cumulative dividend growth of 154% has fueled a stock price that has tripled in the past seven years.

The secret has been Sprecher and his constant innovation on the ICE platform. He founded the company as an energy exchange system two decades ago. In the years to come, it has continued to expand:

In 2007, ICE switched from energy-only trading to all commodities by purchasing the New York Board of Trade (NYBOT). In 2013, Sprecher took to the ultimate equity platform, the NYSE. Four years ago, ICE added a bond offering. Three years ago, after identifying mortgages as the biggest dysfunctional financial problem they had yet to solve, ICE acquired MERSCorp, which gave them a “point of contact” on almost all US mortgages. In 2020, ICE bought Ellie Mae, the leading digital mortgage lending platform, adding it to the mortgage technology they developed. Earlier this year, Sprecher went public with the crypto and digital asset platform BKKT. And a month ago, Mastercard (MA) announced that it is offering crypto services using BKKT. Shares in the ICE spin-off quickly doubled in price, a good deal for Sprecher as ICE still owns 68% of BKKT.

As the ICE platform expands, it generates more and more free cash flow. And Jeff is generous with his piles of money. He recently granted shareholders another 10% dividend increase. Its model of extending its platform and increasing the payment of ICE has become a beautiful virtuous circle!

If you’ve subscribed to Hidden Yields, you already like Jeff. We are already sitting on 30% of total returns (including dividends) since our purchase of ICE in August 2020.

ICE rallied a little beyond my recommended purchase price here. Let’s sit back and look to add more on the declines below $ 132 as we focus on other dividend growth stocks that have yet to skyrocket.

Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy of his latest special report: Your Early Retirement Portfolio: 7% Dividend Every Month Forever.

Disclosure: none

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