It’s never too late to get some dividend religion. Yes the media is all over this record-setting Dow Jones Industrial Average (DJIA). But what good is a record if you didn’t participate in it? I’m afraid that’s the truth that too many investors would not care to admit. It’s never fun when you miss the boat.
Companies are drowning in cash, partly because they’re too scared to do anything with it. That’s why this year will be a record year for dividends and stock buybacks. I prefer dividends because I trust myself more than the corporate guys who are good at exploiting business opportunities but not at investing idle cash. Stock buybacks are good, but corporate egos are still getting in the way of returning cold, hard cash to the owners of the company, the shareholders.
This year is on pace to break a record for dividends, with an expected $300 billion in dividend payouts this year, up from $282 billion, according to S&P Dow Jones Indices.
Are you celebrating the DJIA’s return back to record territory? It’s party time, right? The media certainly think so. If you listen to them, you’re always buying high and selling low. They thought the world was ending at DJIA 6,547. That’s why I like dividend-paying stocks, especially the ones in the RCs. Dividends keep you in the game and guarantee you won’t miss the records: buying low and enjoying the highs.
DJIA 6,547 wasn’t fun. But dividend-paying stocks that yield 4–5% like the RCs make the wait more palatable. Remember, back in 2007 it took the DJIA only 17 months to plunge to the low of 6,547 in March of 2009. It took four years to break the record last week with a close at 14,253. It’s been a great five-year run if you’ve had dividend payers.
Imagine having no dividends the next time around. Let’s not forget that it has taken as much as 25 years for the DJIA to get from its bear-market low to a new high. That was 7,253 days from November 13, 1929, to November 23, 1954. That’s a long time to wait for the stock market. Having the peace of mind brought by dividends can make the waiting much easier.
