Alright, so here’s the thing. I’ve been hearing this chatter from investors — you know, those folks who aren’t into dividends. Their whole shtick is like, “Why hand out cash when you can use it to grow the biz?” Sounds logical on paper, right? But wait — the former Prez, Joe Biden, called it “a bunch of malarkey!” Why? Well, let’s chew on that for a sec.
Now, seriously, I’m not saying investment is bad. Growth is cool, acquisitions are cool. But sometimes, these execs go wild with shareholders’ cash just because they have it. Like, is that the best move? Hmm.
In my book — yep, I wrote one — I chatted with Scott Kingsley from Community Bank System about this. He was all, “We’re into ‘capital efficiency,’ not hoarding cash for random buys. Dividends keep us honest.” He had a point. Their dividend policy makes them think twice, thrice, before ringing up the capital markets and saying, “Hey, let’s buy this thing.”
Now, about bad deals. Can you even count them? Companies see cash and think “Yay, let’s splurge!” Take Quaker Oats snagging Snapple for $1.7 billion in ‘94. Three years later, they sold it for $300 million. Oh snap, that’s a $25 per share loss they’re probably still crying over.
Same drama with Clorox buying Burt’s Bees. They coughed up $925 million in 2007 and four years on, took a $250 million hit. Imagine getting a $2/share dividend instead. Sweet, right?
Anyway, there’s this whole thing about dividends equaling stronger earnings. Smart folks at Chicago and Harvard (yep, those guys) concluded dividend payers have solid earnings. Less drama, more stability. If a company’s earnings are reliable, chances are, their stock’s gonna follow suit. It’s like a law or something.
And you know what’s wild? Companies dishing out dividends have been crushing it. Over 45 years, they outshined the market by 170.6%! Meanwhile, non-dividend ones… well, snooze fest. Plus, you get income while your stocks are climbing. Win-win, am I right?
So next time someone’s like, “Dividends? Nah.” Just smile and sip your overpriced coffee. Chances are, you’ll be doing just fine, probably picking up the tab for lunch in a few. Because, dividends, folks. Dividends.
