In spite of the many articles published here at Dividend Money and the powerful rally that took place over the summer across global equity markets, some investors are still not ready to plunge back into equities.
However, long-term Investors who choose to sit in perceived ‘safe’ investment like savings accounts, CDs and money market funds should realize that the historically low yields are likely going to leave their portfolio returns flat for some time.
In response to the low yield environment, it seems that some are taking innovative (albeit somewhat questionable) measures. That said, an interesting investmetn vehicle has popped up in France that gives a whole new meaning to ‘alternative investing’. It seems that investors over there are turning their attention to an age old option – cow lease contracts!
Cow Lease Contracts
The process goes something like this:
Buy a couple of cows and rent them out to professional farmers for milk production. From a cost perspective, this is a plus as it helps the farmers generate cash flow and frees up money for other necessary expenditures like buildings and machinery. This type of meat market may sound extreme but promoters of cow leasing suggest that the potential yields are 4 to 5 times that being paid on savings vehicles today.
As the herd grows, each new cow represents a new source of cash flow. New offspring cover deaths in the herd, some cows are sold off to cover maintenance costs and in particularly fertile years, the return on investment for each cow can be as high as 7%. Investors can sell the new cows for cash or continue to build up their herd to then draw a regular income at retirement.
Cow Lease Risks
Although it may sound like a nifty little investment strategy, as with all investments these cash cows are not without risk. Fluctuations on the price of meat, milk and animal feed as well as unexpected disease are just some of the considerations for cow contract investors.
While environments of change often motivate innovation (did you know that Disney (NYSE:DIS), FedEx (NYSE:FDX), Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) were founded during periods of economic recession?), discipline remains the key to long-term investment success.
As dividend growth investors, we must remain confident that we are on the right track to achieving our long-term goals. Whether those ultimate investing goals are growth or income. It also means that we won’t need to follow the herd on the latest investment fad or have to convert our houses into cattle ranches anytime soon!