"Rick Stooker is on the right track. We also intend to pursue a more income-oriented strategy in the years to come. Capital gains are subject to both the risk of a decline in economic fundamentals and a deterioration in market psychology. High-quality dividends and income are subject only to the former, and that makes a big difference in modeling your portfolio returns in retirement."
-- Charles Lewis Sizemore CFA, Senior Analyst HS Dent Investment Management, LLC http://www.hsdent.com/
"I am a Chartered Accountant in Canada and spent most of my career teaching in a community college.
"Over the years, I have used various "plans," with varying degrees of success, but had never given much thought to dividends, so I fell prey to the hype about capital gains. So what was I thinking? Should have been investing for dividends.
"I also learned about some new investment vehicles, and got a "heads up" on some investments that I was aware of, but put on the back burner.
"Wish I knew about all this stuff when I was in my 20's, or at least paid attention to the theories involved in my 40's."
--- Dennis Wilson
"What an eye-opener!!!
"I had heard about REITs, MLPs, BDCs, but you really explained their advantages and disadvantages. Thank you, Rick. You have set me on the right path to generate a steady income stream."
-- Kenny H
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11. May hide poor management decisions on the use of cash
The conventional wisdom is that because dividends are paid out of a company's retained earnings (its net income after paying taxes), they reduce the company's ability to reinvest its profits and therefore to grow in the future.
In some businesses, this makes sense. In some industries, companies must spend all their cash on the latest, most modern and efficient equipment and factories, just to keep up with the competition.
I salute those businesses, but don't want to invest in them, and advise you not to also.
In many companies, management uses the cash available to buy up businesses it doesn't know how to run properly, makes other inefficient purchases, or otherwise wastes it.
Robert Arnott, editor of FINANCIAL ANALYSTS JOURNAL, and Clifford Nasness, president of AQR Capital Management, did a study that found that companies that began paying higher dividends actually had higher than average earnings in following years.
12. May reflect other factors affecting the market price, rather than efficient reinvestment of retained earnings by management
The conventional wisdom says when management efficiently and effectively uses retained earnings to grow the company, its stock market price rises proportionately, reflecting that growth.
This assumes there's a rational, clear-cut, direct cause-effect relationship between a company's financial standing and its stock price. So when a company's financial standing improves, its stock price rises proportionately.
Unfortunately, modern finance has found a stock's market price is only about 10-20% determined by the company's financial standing.
The other 80-90% is determined by the overall market or by the industry sector.
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Dutch
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Already translated.
Translated by Marlies Perman
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French
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Translated by Joseph Habamahirwe
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Author review: He was professional to work with. |
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German
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Translated by John Wannecke
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Author review: Quick and thorough. |
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Portuguese
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Already translated.
Translated by Makoto Yamamoto
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Spanish
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Already translated.
Translated by Carlos Blanco
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