Grow your income by 16%...

But share repurchases are only one way a company can reward shareholders. The other is dividends. IBM is also a relentless dividend-grower...

The final financial clue is dividend growth. IBM has raised its dividend every year for the last 16 years. Over the past 10 years, its dividend has grown at an average rate of 18.1% per year. (IBM has paid a dividend every year for 96 years in a row.) The current yield on the stock is less than 2%, which will turn most dividend-focused investors off. But that's because most investors simply don't understand that buying a business with all the financial clues that can grow its dividend at high, inflation-beating rates for decades is far more important than getting a high current yield. Plenty of scared investors are hiding out in Treasury bonds. They're way too obsessed with safety right now. That's why the 10-year Treasury note interest rate recently hit an all-time low of 1.39%. After 2% inflation, that's a negative return. These scared investors are agreeing to have the value of their capital destroyed each year in return for safety. Yet if you accept IBM's 1.9% yield today, you're likely to see your income raised by a fat, double-digit number (probably in the mid-teens) within the next year. You'll destroy inflation rather than having inflation destroy you.

We consider businesses that efficiently grow margins without investing large amounts of capital to be "capital efficient." The best way to quickly sniff out capital efficiency is to look for companies that return a large percentage of profits to owners. Think about it... the only way you're able to return a ton of cash to shareholders is if you don't need that cash for other reasons – like growing the business.

There are plenty of good, capital-efficient companies out there, and you can make a fortune buying them... assuming you don't pay too much. Hershey is one of our favorite capital-efficient companies.

Every Halloween and Easter, demand for Hershey products temporarily spikes. And Hershey handles the extra demand without much drama. They simply buy some extra cocoa and sugar and run the equipment an extra shift.

When Hershey's costs go up, it has no problem passing the costs on to customers. For example, according to its annual report, in March 2011, Hershey's "announced a weighted-average increase in wholesale prices of approximately 9.7% across the majority of our U.S., Puerto Rico, and export portfolio, effective immediately."

Have you bought a Hershey product since March 2011? Did you notice the 10% price hike? Me neither. If you've got a loyal customer base that loves your product, you can do stuff like that. Despite the across-the-board price hike, Hershey's has actually sold more units every single year since 2011, which has driven a 26% increase in revenues.

Not all businesses are so lucky. Think about air travel. This is a HUGE business that generates hundreds of billions of dollars of annual revenues. In 1903, there were only two aircraft passengers – as you probably know, their names were Orville and Wilbur. In 2013 – 110 years after the Wright brothers took their famous first flight in Kitty Hawk – nearly 700 million passengers flew on aircraft operated by U.S. carriers.

With staggering revenues, and an impressive 100-plus-year history of ever-increasing passenger demand, you might think an airline would be a great place for your investment dollars. You'd be wrong...

In tomorrow's Digest Premium, I'll explain why airlines are such terrible businesses, but investors are still piling in.

– Bryan Beach