To Investors in Stock Dividends are the Reward; and not Rises in Stock Prices
For anyone interested in finance and personal solvency, the first decade of the millennium was eventful if nothing else. It started out on a high over the Internet business boom, and then more or less, things started steadily heading downhill - the dot com bust, the housing market collapse, the stock market collapse and the collapse of everything else that was left standing. The last year of the decade though began with things distinctly looking up; and cautiously speaking, it does look like the recovery might stay the course. But you know, I've been through so much through the last ten years - what with the Federal Reserve god Alan Greenspan just shrugging his shoulders and saying "Who knew?" - I'm not about to warmly trust my life to anything the suits say anymore. As much as they would like us to believe that there won't be any terrible news with a market collapse anymore (there was another one-day collapse in May), I would still like to watch my own back. To me, going back to a more conservative era of personal finance wisdom makes a lot of sense. To me, investing for stock dividends make a lot of sense.
The way it's been all these years, all we need is to hear a new investment buzzword, and right away we are on it like they were giving money away for free. Stock dividends have been around for so long that it's kind of hard to turn it into a buzzword. The whole concept has been languishing in anonymity for a long time. That's what old people invest in - they don't game the market, they don't do investment tight ropes to make a hundred thousand bucks overnight - they just sit there and wait for the companies to pay a dollar on each share they own once in a way. As much as you want to ridicule the idea of waiting around for stock dividends, they are in fact an important part of every conservative and prudent investing system ever known of. Just look at where it got the country - going for the pot of gold at the end of the rainbow over last ten years. If it wasn't buying housing stocks, it was buying Internet companies or other tech companies. It's been an absolute disaster though trying to second-guess the market and find a new cheap investment that you think is the next big thing.
On the other hand, any standard portfolio of a dozen stocks that will pay you dividends, has actually appreciated more than 10% over last ten years. Investing for dividends can be such a rewarding and liberating experience. For one thing, there is nothing you actually have to do watching the markets; finding the right time to sell is just not your business anymore - they actually pay you stock dividends just for letting your investments gather dust in your drawer. And the dividends, as modest as they are, do accrue to a tidy sum. The way these companies work, they know that if they pay you a dividend one year, you will completely expect them to pay you in the same way every single year. They wouldn't offer to pay you even one year, if they didn't think they could keep it up every single year. That certainly should tell you how confident they are of the financial health the company will be in in the future. Moreover, all you need do is to look at how the company has done with its payouts the last few years. Any company that keeps up its slow and steady word over a number of years, is undoubtedly reliable. How can you not respect a company that can train a new generation of managers every few years to keep to the same slow and steady path of progress as the earlier one?
Still, as dependable an indicator as stock dividends are of a company's intent and ability, you can still go wrong with this. Take Citigroup for instance; they paid high dividends for years and years, until they completely went kaput and crashed. Actually, a company that pays out really high dividends can be less than trustworthy. Right now, I'm looking at Chevron and the power company Exelon. They are paying out in excess of 3% in stock dividends now, which is about average. That's actually a good sign.