Dividend Investor Quotes

The true investor . . . will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.

The concept of ‘spending’ is problematic. When we are functioning with intention and wisdom, the only thing we really do with money is invest. There are small investments, and big investments. There are good investments and bad investments…The ROI we get for some investments is a product or service - the groceries in exchange for money, or the the car wash in exchange for money. And the ROI we get for other investments may be additional money in the form of interest or dividends, while the ROI in other cases is just a sense of fulfillment after maybe giving to charity or buying a gift for your spouse, or paying for your kids tuition, or creating art. When we look at it from this perspective, we get rid of the expectation that sending money out is a loss, and we replace it with an expectation that sending money out will always result in an ROI of some kind. Everything is an investment when we act with intention and wisdom.

Wisdom is really the key to wealth. With great wisdom, comes great wealth and success. Rather than pursuing wealth, pursue wisdom. The aggressive pursuit of wealth can lead to disappointment. Wisdom is defined as the quality of having experience, and being able to discern or judge what is true, right, or lasting. Wisdom is basically the practical application of knowledge. Rich people have small TVs and big libraries, and poor people have small libraries and big TVs. Become completely focused on one subject and study the subject for a long period of time. Don't skip around from one subject to the next. The problem is generally not money. Jesus taught that the problem was attachment to possessions and dependence on money rather than dependence on God. Those who love people, acquire wealth so they can give generously. After all, money feeds, shelters, and clothes people. They key is to work extremely hard for a short period of time (1-5 years), create abundant wealth, and then make money work hard for you through wise investments that yield a passive income for life. Don't let the opinions of the average man sway you. Dream, and he thinks you're crazy. Succeed, and he thinks you're lucky. Acquire wealth, and he thinks you're greedy. Pay no attention. He simply doesn't understand. Failure is success if we learn from it. Continuing failure eventually leads to success. Those who dare to fail miserably can achieve greatly. Whenever you pursue a goal, it should be with complete focus. This means no interruptions. Only when one loves his career and is skilled at it can he truly succeed. Never rush into an investment without prior research and deliberation. With preferred shares, investors are guaranteed a dividend forever, while common stocks have variable dividends. Some regions with very low or no income taxes include the following: Nevada, Texas, Wyoming, Delaware, South Dakota, Cyprus, Liechtenstein, Luxembourg, Panama, San Marino, Seychelles, Isle of Man, Channel Islands, Curaçao, Bahamas, British Virgin Islands, Brunei, Monaco, Qatar, United Arab Emirates, Saudi Arabia, Bahrain, Bermuda, Kuwait, Oman, Andorra, Cayman Islands, Belize, Vanuatu, and Campione d'Italia. There is only one God who is infinite and supreme above all things. Do not replace that infinite one with finite idols. As frustrated as you may feel due to your life circumstances, do not vent it by cursing God or unnecessarily uttering his name. Greed leads to poverty. Greed inclines people to act impulsively in hopes of gaining more. The benefit of giving to the poor is so great that a beggar is actually doing the giver a favor by allowing the person to give. The more I give away, the more that comes back. Earn as much as you can. Save as much as you can. Invest as much as you can. Give as much as you can.

Do not trust historical data—especially recent data—to estimate the future returns of stocks and bonds. Instead, rely on interest and dividend payouts and their growth/failure rates.

Discounted Cash Flow The discounted cash flow method of valuation is the most sophisticated (and the most difficult) method to use in valuing the business. With this method you must estimate all the cash influxes to investors over time (dividends and ultimate stock sales) and then compute a “net present value” using an assumed discount rate (implied interest rate).

Dividend Record. One of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years. We think that a record of continuous dividend payments for the last 20 years or more is an important plus factor in the company’s quality rating. Indeed the defensive investor might be justified in limiting his purchases to those meeting this test.

Standing for decentralized autonomous organization, The DAO was a complex dApp that programmed a decentralized venture capital fund to run on Ethereum. Holders of The DAO would be able to vote on what projects they wanted to support, and if developers raised enough funding from The DAO holders, they would receive the funds necessary to build their projects. Over time, investors in these projects would be rewarded through dividends or appreciation of the service provided.

she feels lucky to have a job, but she is pretty blunt about what it is like to work at Walmart: she hates it. She’s worked at the local Walmart for nine years now, spending long hours on her feet waiting on customers and wrestling heavy merchandise around the store. But that’s not the part that galls her. Last year, management told the employees that they would get a significant raise. While driving to work or sorting laundry, Gina thought about how she could spend that extra money. Do some repairs around the house. Or set aside a few dollars in case of an emergency. Or help her sons, because “that’s what moms do.” And just before drifting off to sleep, she’d think about how she hadn’t had any new clothes in years. Maybe, just maybe. For weeks, she smiled at the notion. She thought about how Walmart was finally going to show some sign of respect for the work she and her coworkers did. She rolled the phrase over in her mind: “significant raise.” She imagined what that might mean. Maybe $2.00 more an hour? Or $2.50? That could add up to $80 a week, even $100. The thought was delicious. Then the day arrived when she received the letter informing her of the raise: 21 cents an hour. A whopping 21 cents. For a grand total of $1.68 a day, $8.40 a week. Gina described holding the letter and looking at it and feeling like it was “a spit in the face.” As she talked about the minuscule raise, her voice filled with anger. Anger, tinged with fear. Walmart could dump all over her, but she knew she would take it. She still needed this job. They could treat her like dirt, and she would still have to show up. And that’s exactly what they did. In 2015, Walmart made $14.69 billion in profits, and Walmart’s investors pocketed $10.4 billion from dividends and share repurchases—and Gina got 21 cents an hour more. This isn’t a story of shared sacrifice. It’s not a story about a company that is struggling to keep its doors open in tough times. This isn’t a small business that can’t afford generous raises. Just the opposite: this is a fabulously wealthy company making big bucks off the Ginas of the world. There are seven members of the Walton family, Walmart’s major shareholders, on the Forbes list of the country’s four hundred richest people, and together these seven Waltons have as much wealth as about 130 million other Americans. Seven people—not enough to fill the lineup of a softball team—and they have more money than 40 percent of our nation’s population put together. Walmart routinely squeezes its workers, not because it has to, but because it can. The idea that when the company does well, the employees do well, too, clearly doesn’t apply to giants like this one. Walmart is the largest employer in the country. More than a million and a half Americans are working to make this corporation among the most profitable in the world. Meanwhile, Gina points out that at her store, “almost all the young people are on food stamps.” And it’s not just her store. Across the country, Walmart pays such low wages that many of its employees rely on food stamps, rent assistance, Medicaid, and a mix of other government benefits, just to stay out of poverty. The

Equity financing, on the other hand, is unappealing to cooperators because it may mean relinquishing control to outside investors, which is a distinctly capitalist practice. Investors are not likely to buy non-voting shares; they will probably require representation on the board of directors because otherwise their money could potentially be expropriated. “For example, if the directors of the firm were workers, they might embezzle equity funds, refrain from paying dividends in order to raise wages, or dissipate resources on projects of dubious value.”105 In any case, the very idea of even partial outside ownership is contrary to the cooperative ethos. A general reason for traditional institutions’ reluctance to lend to cooperatives, and indeed for the rarity of cooperatives whether related to the difficulty of securing capital or not, is simply that a society’s history, culture, and ideologies might be hostile to the “co-op” idea. Needless to say, this is the case in most industrialized countries, especially the United States. The very notion of a workers’ cooperative might be viscerally unappealing and mysterious to bank officials, as it is to people of many walks of life. Stereotypes about inefficiency, unprofitability, inexperience, incompetence, and anti-capitalism might dispose officials to reject out of hand appeals for financial assistance from co-ops. Similarly, such cultural preconceptions may be an element in the widespread reluctance on the part of working people to try to start a cooperative. They simply have a “visceral aversion” to, and unfamiliarity with, the idea—which is also surely a function of the rarity of co-ops itself. Their rarity reinforces itself, in that it fosters a general ignorance of co-ops and the perception that they’re risky endeavors. Additionally, insofar as an anti-democratic passivity, a civic fragmentedness, a half-conscious sense of collective disempowerment, and a diffuse interpersonal alienation saturate society, this militates against initiating cooperative projects. It is simply taken for granted among many people that such things cannot be done. And they are assumed to require sophisticated entrepreneurial instincts. In most places, the cooperative idea is not even in the public consciousness; it has barely been heard of. Business propaganda has done its job well.106 But propaganda can be fought with propaganda. In fact, this is one of the most important things that activists can do, this elevation of cooperativism into the public consciousness. The more that people hear about it, know about it, learn of its successes and potentials, the more they’ll be open to it rather than instinctively thinking it’s “foreign,” “socialist,” “idealistic,” or “hippyish.” If successful cooperatives advertise their business form, that in itself performs a useful service for the movement. It cannot be overemphasized that the most important thing is to create a climate in which it is considered normal to try to form a co-op, in which that is seen as a perfectly legitimate and predictable option for a group of intelligent and capable unemployed workers. Lenders themselves will become less skeptical of the business form as it seeps into the culture’s consciousness.

A good rule of thumb is to never, ever pay more than 15 years fair rental value for any residence.c This computes out to a 6.7 percent (1/15th) gross rental dividend, or 3.7 percent after taxes, insurance, and maintenance, which is about what you might expect from a mixed portfolio of stocks and bonds.

Type I social business: The business objective is to overcome poverty, or one or more problems (such as education, health, technology access, and environment) that threaten people and society—not to maximize profit. The company will attain financial and economic sustainability. Investors get back only their investment amount. No dividend is given beyond the return of the original investment. When the investment amount is paid back, profit stays with the company for expansion and improvement. The company will be environmentally conscious. The workforce gets market wage with better-than-standard working conditions. Do it with joy!!!

It costs more to transact abroad, and many foreign governments tax stock dividends; although you can recover this cost in a taxable account through the foreign tax credit on your U.S. tax return, you cannot do so in a retirement account.

had exported an average of £13,000,000 worth of goods to Britain each year from 1835 to 1872 with no corresponding return of money; in fact, payments to people residing in Britain, whether profits to Company shareholders, dividends to railway investors or pensions to retired officials, made up a loss of £30 million a year.

Graham’s timeless lesson for the intelligent investor, as valid today as when he prescribed it in his first edition, is clear: “the real money in investment will have to be made—as most of it has been made in the past—not out of buying and selling but of owning and holding securities, receiving interest and dividends and increases in value.” His

Dividend received from a mutual fund is exempt from tax for the investor. However, other than equity oriented MF schemes, Dividend Distribution Tax (DDT) is required to be paid by the MF schemes issuing the dividend. Please refer to DDT for more details.

An equity investor buys and holds the shares of stock in a company in anticipation of dividends and/or capital gains.

Blue-chip stocks are a reasonable investment for the elderly investor because they usually pay cash dividends which the retired person may need to live on, and are usually more conservative than other investments, excluding bonds. Holdings in these stocks should be long-term to avoid trading costs and speculation.

but the truth is that comparing what private equity firms used to be—and where the perception of private equity still sits in many quarters—to what they are now is like comparing a Motorola cellphone from the 1990s to the latest iPhone. There’s a world of differences; it’s not even close. For pension funds and other investors in private equity funds, the firms they back gives them access to investment opportunities they can’t find or execute themselves. What’s more, they get consistent investment returns out of these opportunities, whether they include leveraged buyouts, credit investments, infrastructure assets, essential utilities, real estate transactions, technology deals, natural resources projects, banks, insurance companies, or life science opportunities. They can buy companies, carve out businesses, build up companies through acquisitions and organic growth, spin off businesses, take companies private from the public market, buy businesses from other funds they manage, draw margin loans to finance dividends, and refinance the capital structure pre-exit. And more besides.

To fill this gap in the capital market, Davis and Rock set themselves up as a limited partnership, the same legal structure that had been used by a short-lived rival called Draper, Gaither & Anderson.[18] Rather than identifying startups and then seeking out corporate investors, they began by raising a fund that would render corporate investors unnecessary. As the two active, or “general,” partners, Davis and Rock each seeded the fund with $100,000 of their own capital. Then, ignoring the easy loans to be had from the fashionable SBIC structure, they raised just under $3.2 million from some thirty “limited” partners—rich individuals who served as passive investors.[19] The beauty of this size and structure was that the Davis & Rock partnership now had a war chest seven and a half times larger than an SBIC, and with it the ammunition to supply companies with enough capital to grow aggressively. At the same time, by keeping the number of passive investors under the legal threshold of one hundred, the partnership flew under the regulatory radar, avoiding the restrictions that ensnared the SBICs and Doriot’s ARD.[20] Sidestepping yet another weakness to be found in their competitors, Davis and Rock promised at the outset to liquidate their fund after seven years. The general partners had their own money in the fund, and thus a healthy incentive to invest with caution. At the same time, they could deploy the outside partners’ capital for a limited time only. Their caution would be balanced with deliberate aggression. Indeed, everything about the fund’s design was calculated to support an intelligent but forceful growth mentality. Unlike the SBICs, Davis & Rock raised money purely in the form of equity, not debt. The equity providers—that is, the outside limited partners—knew not to expect dividends, so Davis and Rock were free to invest in ambitious startups that used every dollar of capital to expand their business.[21] As general partners, Davis and Rock were personally incentivized to prioritize expansion: they took their compensation in the form of a 20 percent share of the fund’s capital appreciation. Meanwhile, Rock was at pains to extend this equity mentality to the employees of his portfolio companies. Having witnessed the effect of employee share ownership on the early culture of Fairchild, he believed in awarding managers, scientists, and salesmen with stock and stock options. In sum, everybody in the Davis & Rock orbit—the limited partners, the general partners, the entrepreneurs, their key employees—was compensated in the form of equity.

Wealth grew more concentrated during his reign. Before Welch, corporate profits were largely reinvested in the company or paid out to workers rather than sent back to stock owners. In 1980, American companies spent less than $50 billion on buybacks and dividends. By the time of Welch’s retirement, a much greater share of corporate profits was going to investors and management, with American companies spending $350 billion on buybacks and dividends in 2000.

Adequate size. A sufficiently strong financial condition. Continued dividends for at least the past 20 years. No earnings deficit in the past ten years. Ten-year growth of at least one-third in per-share earnings. Price of stock no more than 1½ times net asset value. Price no more than 15 times average earnings of the past three years.

In Guatemala, in 1954, a legally elected government was overthrown by an invasion force of mercenaries trained by the CIA at military bases in Honduras and Nicaragua and supported by four American fighter planes flown by American pilots. The invasion put into power Colonel Carlos Castillo Armas, who had at one time received military training at Fort Leavenworth, Kansas. The government that the United States overthrew was the most democratic Guatemala had ever had. The President, Jacobo Arbenz, was a left-of-center Socialist; four of the fifty-six seats in the Congress were held by Communists. What was most unsettling to American business interests was that Arbenz had expropriated 234,000 acres of land owned by United Fruit, offering compensation that United Fruit called "unacceptable." Armas, in power, gave the land back to United Fruit, abolished the tax on interest and dividends to foreign investors, eliminated the secret ballot, and jailed thousands of political critics.

The dividend discount model suggests that in an efficient market, the current price of a stock should equal the present value of all expected future dividends, assuming for the sake of simplicity that the investor has no intention of selling the stock. (The present value is sometimes called the discounted value, since the present value of an item is discounted from its value in the future.)

Ivar decided to introduce a new type of security, which he called a “B Share.” Ivar began with Swedish Match. He divided its common shares into two classes. Each class would have the same claim to dividends and profits, but the B Share would carry only 1/1000 of a vote, compared to one vote for each A Share. It was a simple, but profound, insight. B Shares could be sold to investors without affecting control.20 Ivar could double the size of his capital, while diluting his control by just a fraction of a percent.

In late July 1925, International Match sold 450,000 new preferred shares for 45 dollars per share – a full 10 dollars more than the issue just eight months earlier. Including dividends, investors in the previous issue already had profited by almost 30 percent. With that track record, it was easy for Lee Higginson to raise an additional 19.6 million dollars for International Match. After paying expenses and other obligations, about 17 million dollars remained. That was exactly the amount of Ivar’s obligation to Poland. At Ivar’s direction, the cash banked like a billiard ball from International Match to Swedish Match to Garanta to Poland – from New York to Stockholm to Amsterdam to Warsaw. It was a complex transaction, but the pieces seemed to fit. Or did they? Did the money make it through those last steps? Did Ivar initially send Poland only the 6 million dollars that Torsten had agreed to lend, the initial amount that the Polish government had approved? Or did he also send the additional amounts that supposedly were part of his secret agreement with Dr Glowacki, but were not yet approved by the government? No one in America knew, and Ivar intended to keep it that way.

If you reinvest dividends, which can often be a very smart investment move, you will no longer get to see on your statement what you originally paid to buy the position. Instead, our dividend profit masquerades as principal in a very powerful illusion that affects almost every investor.

TWO AND A HALF CENTURIES AGO, Amsterdam was the world’s commercial center, but many of its wealthy merchants were reeling from one of the world’s first financial crises. The shares of the British East India Company had collapsed, culminating in a series of bank failures, government bailouts, and ultimately nationalization, a debacle that rippled across the continent’s nascent markets. For a little-known Dutch merchant and stockbroker, it proved the inspiration for an idea ahead of its time. In 1774, Abraham von Ketwich set up a novel, pooled investment trust he called Eendragt Maakt Magt—Dutch for “Unity Creates Strength.” This would sell two thousand shares for five hundred guilders each to individual investors, and invest the proceeds into a diversified portfolio of fifty bonds. These were divided into ten different categories, from plantation loans, bonds backed by Spanish or Danish toll road payments, to an assortment of European government bonds. At the time, bonds were physical certificates written on paper or even goatskin, and these were stored in a solid iron chest with three locks, which could be opened only by Eendragt Maakt Magt’s board and an independent notary. The aim was to pay a 4 percent annual dividend, and disburse the final proceeds only after twenty-five years, hoping that the diversity of the portfolio would protect investors.1 As it turns out, a subsequent Anglo-Dutch war in 1780 and Napoleon’s occupation of Holland in 1795 wreaked havoc on Eendragt Maakt Magt. The annual payments never materialized, and investors didn’t receive their money back until 1824, albeit then receiving 561 guilders a share. Nonetheless, Eendragt Maakt Magt was a brilliant invention that would go on to inspire the birth of investment trusts in Great Britain and eventually the mutual fund we know today. It is also arguably the ultimate intellectual forefather of today’s index funds, given its minimal trading, diversified approach, and low fees, charging a mere 0.2 percent a year.

Union Street Railway was a New Bedford, Massachusetts-based bus company. With the equity trading below the net cash on the company’s balance sheet, Union Street was a classic net-net when Buffett bought the stock. This was a small, thinly traded company with a market capitalization below $1 million. The small float meant acquiring stock required a bit of work and persistence by the young, enterprising investor. Like the other stocks discussed so far, it was cheap. But in contrast to the previous investments discussed in this book, this one was actually losing money at the time of Buffett’s purchase. Yet this stock would be a huge winner for Buffett, yielding him a dollar profit worth more than 4.5x the average household yearly income at the time. After accumulating a meaningful stake in the company, Buffett took a trip to Massachusetts to meet with the company’s president. While he did not run a proxy contest or take aggressive action to prompt a capital return, the company paid a substantial dividend shortly after his visit.109 Union Street Railway was an early lesson in how positive changes in capital allocation can lead to windfall profits.

The point is that market returns are determined by both investment factors—the fundamentals of the initial dividend yield on stocks plus the rate at which their earnings grow—and by speculative factors— the change in the price that investors will pay for each $1 of corporate earnings.

The indefiniteness of finance can be bizarre. Think about what happens when successful entrepreneurs sell their company. What do they do with the money? In a financialized world, it unfolds like this: • The founders don’t know what to do with it, so they give it to a large bank. • The bankers don’t know what to do with it, so they diversify by spreading it across a portfolio of institutional investors. • Institutional investors don’t know what to do with their managed capital, so they diversify by amassing a portfolio of stocks. • Companies try to increase their share price by generating free cash flows. If they do, they issue dividends or buy back shares and the cycle repeats. At no point does anyone in the chain know what to do with money in the real economy. But in an indefinite world, people actually prefer unlimited optionality; money is more valuable than anything you could possibly do with it. Only in a definite future is money a means to an end, not the end itself.

for the stock market, corporate earnings and dividends; for the bond market, interest payments. Market returns, however, are calculated before the deduction of the costs of investing, and are most assuredly not based on speculation and rapid trading, which do nothing but shift returns from one investor to another. For the long-term investor, returns have everything to do with the underlying economics of corporate America and very little to do with the mechanical process of buying and selling pieces of paper. The art of investing in mutual funds, I would argue, rests on simplicity and common sense.

For Long-Term Investors   Stock investments are ideal for reaping profits within a long timeframe. Stocks beat other investment vehicles (e.g. bonds) when measured in a period of ten years or more. Actually, the people who invested in the stock market during the Great Depression collected profits over the long-term.   If you will analyze the performance of all investment vehicles for the past 50 years and divide the results into ten-year periods, you'll see that stocks outclass other investment types in terms of total profits (considering that investors collected dividends and experienced capital compounding).

The superior performance of the original S&P 500 firms surprises most investors. But value investors (as described in Chapter 12) know that growth stocks often are priced too high, and excitement over their prospects often induces investors to pay too high a price. Profitable firms that do not catch investors’ eyes are often underpriced. If investors reinvest the dividends of such firms, they are buying undervalued shares that will add significantly to their return.

Whether appropriate or not, the term “value investing” is widely used. Typically, it connotes the purchase of stocks having attributes such as a low ratio of price to book value, a low price-earnings ratio, or a high dividend yield. Unfortunately, such characteristics, even if they appear in combination, are far from determinative as to whether an investor is indeed buying something for what it is worth and is therefore truly operating on the principle of obtaining value in his investments.

South-east Asia’s high savings rates, most of which flowed into bank deposits, lent themselves to outsize banking systems, which invited godfather abuse. There is, in turn, a pretty direct line from the insider manipulation of regional banks to the Asian financial crisis. The ‘over-banked’ nature of south-east Asia also helps explain a conundrum that has occupied some of the region’s equity investors: why, despite heady economic growth, have long-term stock market returns in south-east Asia been so poor? Since 1993, when a flood of foreign money increased capitalisation in regional markets by around 2.5 times in one calendar year,37 dollar-denominated returns with dividends reinvested (what investors call ‘total’ returns) in every regional market have been lower than those in the mature markets of New York and London, and a fraction of those in other emerging markets in eastern Europe and Latin America.38

Good news is extrapolated into strong market expectations which are often not realized. As important, investor expectations are negatively correlated with model-based expected returns derived from dividend/price, consumption patterns and market valuation.  Investors, no matter what the level of experience, do not seem to use the models that provide useful information on expected returns. Put differently, when expected return models forecast higher returns, they are usually correct. When the expectations of returns are high from surveys, the actual returns are low. These market expectations are correlated with mutual fund flows. The surveys show expectation that investors actually use, albeit incorrectly.

It took just over 15 years to recover the money invested at the 1929 peak, following a crash far worse than Smith had ever examined. And since World War II, the recovery period for stocks has been even better. Even including the recent financial crisis, which saw the worst bear market since the 1930s, the longest it has ever taken an investor to recover an original investment in the stock market (including reinvested dividends) was the five-year, eight-month period from August 2000 through April 2006.

The government can put dividends on the same tax basis as capital gains if the tax authorities allow investors to obtain a tax deferral on reinvested dividends until the stock is sold.

In India, dividend income is exempt from income tax for investors, provided the dividend distribution tax (DDT) is paid by the company or the mutual fund schemes declaring the dividend. While

Mutual Fund Investments are not transparent: In India, SEBI regulates MFs. The money market MFs are regulated by RBI. There are restrictions as to the sponsor, board of trustees, asset management company, custodian, registrar, dealing with brokers, etc. The investment objective, fund manager, entry and exit loads, AUM, expense ratio and other terms and conditions are already known and provided in the SAI. Also, every MF scheme is required to publish a fact sheet on a quarterly/monthly basis that includes all the important facts that an investor would need to know about the scheme including portfolio holdings, past returns, performance ratios and dividends. Also, information relating to what’s in (bought) and what’s out (sold) by mutual funds is also available.

In the dividend options, majority of gain is distributed to investors periodically as dividend and NAV is reduced by the dividend amount. If

Unlike common stocks, whose dividends and earnings fluctuate with the ups and downs of the company’s business, bonds pay a fixed dollar amount of interest. If the U.S. Treasury offers a $1,000 20-year, 5 percent bond, that bond will pay $50 per year until it matures, when the principal will be repaid. Corporate bonds are less safe, but widely diversified bond portfolios have provided reasonably stable interest returns over time.

Investors can take advantage of this mispricing by buying low-cost passively managed portfolios of value stocks or fundamentally weighted indexes that weight each stock by its share of dividends or earnings rather than by its market value.

We want more money in real terms after taking inflation into account. Here, I would like to emphasize that whether you consider yourself a stock, gold, private business, or real estate investor, or if you only invest for income such as dividends or rental income, all investors in all asset classes have to obey the same laws and principles of investing. There is no exception!   Sometimes,

He claimed that he would rather buy stocks under these conditions, because pigs did not pay a dividend. Plus, you have to feed pigs.   Mr.

With no-load index funds, no transaction fees are levied on contributions. Moreover, mutual funds will automatically reinvest all dividends back into the fund whereas additional transactions could be required to reinvest ETF dividends. We recommend that individuals making periodic contributions to a retirement plan use low-cost indexed mutual funds rather than ETFs.

What does diversification mean in practice? It means that when you invest in the stock market, you want a broadly diversified portfolio holding hundreds of stocks. For people of modest means, and even quite wealthy people, the way to accomplish that is to buy one or more low-cost equity index mutual funds. The fund pools the money from thousands of investors and buys a portfolio of hundreds of individual common stocks. The mutual fund collects all the dividends, does all the accounting, and lets mutual fund owners reinvest all cash distributions in more shares of the fund if they so wish.

Investors with no knowledge of (or concern for) profits, dividends, valuation or the conduct of business simply cannot possess the resolve needed to do the right thing at the right time.

Hence, after this foreshortened discussion of the major considerations, we once again enunciate the same basic compromise policy for defensive investors—namely that at all times they have a significant part of their funds in bond-type holdings and a significant part also in equities. It is still true that they may choose between maintaining a simple 50–50 division between the two components or a ratio, dependent on their judgment, varying between a minimum of 25% and a maximum of 75% of either. We shall give our more detailed view of these alternative policies in a later chapter. Since at present the overall return envisaged from common stocks is nearly the same as that from bonds, the presently expectable return (including growth of stock values) for the investor would change little regardless of how he divides his fund between the two components. As calculated above, the aggregate return from both parts should be about 7.8% before taxes or 5.5% on a tax-free (or estimated tax-paid) basis. A return of this order is appreciably higher than that realized by the typical conservative investor over most of the long-term past. It may not seem attractive in relation to the 14%, or so, return shown by common stocks during the 20 years of the predominantly bull market after 1949. But it should be remembered that between 1949 and 1969 the price of the DJIA had advanced more than fivefold while its earnings and dividends had about doubled. Hence the greater part of the impressive market record for that period was based on a change in investors’ and speculators’ attitudes rather than in underlying corporate values. To that extent it might well be called a “bootstrap operation.” In

More than thirty-five years ago Scudder, Stevens & Clark issued a brochure entitled “Monuments Rarely Pay Dividends.” “When a business begins to get stately,” it said, “wise investors quietly get out from under. For monuments rarely pay dividends.

Charity is a kind of capital investment for the soul that pays real dividends in your life and in the quality of all life.

The stock market’s performance depends on three factors: real growth (the rise of companies’ earnings and dividends) inflationary growth (the general rise of prices throughout the economy) speculative growth—or decline (any increase or decrease in the investing public’s appetite for stocks)

In June 1949 the S & P composite index sold at only 6.3 times the applicable earnings of the past 12 months; in March 1961 the ratio was 22.9 times. Similarly, the dividend yield on the S & P index had fallen from over 7% in 1949 to only 3.0% in 1961, a contrast heightened by the fact that interest rates on high-grade bonds had meanwhile risen from 2.60% to 4.50%. This is certainly the most remarkable turnabout in the public’s attitude in all stock-market history.

Another peculiarity in the general position of preferred stocks deserves mention. They have a much better tax status for corporation buyers than for individual investors. Corporations pay income tax on only 15% of the income they receive in dividends, but on the full amount of their ordinary interest income. Since the 1972 corporate rate is 48%, this means that $100 received as preferred-stock dividends is taxed only $7.20, whereas $100 received as bond interest is taxed $48. On the other hand, individual investors pay exactly the same tax on preferred-stock investments as on bond interest, except for a recent minor exemption.

No intelligent investor, no matter how starved for yield, would ever buy a stock for its dividend income alone; the company and its businesses must be solid, and its stock price must be reasonable.

The selection of common stocks for the portfolio of the defensive investor should be a relatively simple matter. Here we would suggest four rules to be followed: 1. There should be adequate though not excessive diversification. This might mean a minimum of ten different issues and a maximum of about thirty.† 2. Each company selected should be large, prominent, and conservatively financed. Indefinite as these adjectives must be, their general sense is clear. Observations on this point are added at the end of the chapter. 3. Each company should have a long record of continuous dividend payments. (All the issues in the Dow Jones Industrial Average met this dividend requirement in 1971.) To be specific on this point we would suggest the requirement of continuous dividend payments beginning at least in 1950.* 4. The investor should impose some limit on the price he will pay for an issue in relation to its average earnings over, say, the past seven years. We suggest that this limit be set at 25 times such average earnings, and not more than 20 times those of the last twelve-month period. But such a restriction would eliminate nearly all the strongest and most popular companies from the portfolio. In particular, it would ban virtually the entire category of “growth stocks,” which have for some years past been the favorites

Graham feels that five elements are decisive.1 He summarizes them as: the company’s “general long-term prospects” the quality of its management its financial strength and capital structure its dividend record and its current dividend rate.

If you want to put money in investment funds, buy a group of closed-end shares at a discount of, say, 10% to 15% from asset value, instead of paying a premium of about 9% above asset value for shares of an open-end company. Assuming that the future dividends and changes in asset values continue to be about the same for the two groups, you will thus obtain about one-fifth more for your money from the closed-end shares.

I have always believed that most investors and analysts over-complicate matters. I try to focus on just two yardsticks when investing in a trading company, e.g. PZ Customs: dividend yields and PERs, and two for an investment or property company, e.g. Daejan - net asset values (NAVs) and gearing, i.e. the level of borrowings a company has relative to assets. The gearing factor importantly also applies to trading companies.

What we want is a company that increases profits (and hopefully dividends) each year and where the rating (PE ratio) that the stock market/investors place on the company's shares increases significantly. This is the 'double whammy' any investor should be seeking.

I helped him pick out some solid utility and infrastructure stocks and funds that pay him dividends in the 6% to 7% range.

How is it not possible for the leaders of such giant, public, dispersed-ownership conglomerate companies to take a such a bold step as well to focus on creating long-term value for shareholders and institutional investors? Many investors do not invest in companies for the short term: institutional investors, mutual funds, index funds, and many shareholders, buy and hold patiently for dividends and capital appreciation for the long term. Why, then, do corporate leaders insist that they are unable to invest for the long term due to financial market and analyst pressures? These are interesting research questions that could generate interesting empirical studies.

Ivar had memorized every detail of his actual profits and losses, so he knew what the legitimate amounts were – he simply chose not to share that information with anyone else. He certainly knew his companies would need to generate greater profits to cover the huge dividends his shareholders were expecting. Those cash obligations were real, and it didn’t matter whether the money came from New York or Vaduz. To meet those obligations, Ivar would need to raise more cash. To do that, he needed to persuade investors that his plans were a good bet. And to do that, Ivar needed to acquire some match monopolies in Europe.

At least that was Ivar’s reputation. The truth was more complicated. A large portion of the dividends recently paid by Swedish Match and Kreuger & Toll came from cash raised by International Match in America. In other words, the dividends paid to old investors came from proceeds raised from new ones. That pyramid approach, which had elements of Ponzi’s scheme, couldn’t last forever, and Ivar knew it. Nevertheless, Ivar really was making money, a lot of it, from match operations throughout the world. Unlike Charles Ponzi’s postal reply coupon scam, Ivar’s profits were real. Swedish Match made and sold billions of boxes of matches every year. Kreuger & Toll built landmark buildings throughout Europe. Ivar had real investments in real businesses, ranging from matches to real estate to film. No one could fake that.

Stock Guide material includes “Earnings and Dividend Rankings,” which are based on stability and growth of these factors for the past eight years. (Thus price attractiveness does not enter here.) We include the S & P rankings in our Table 15-1. Ten of the 15 issues are ranked B+ (= average) and one (American Maize) is given the “high” rating of A. If our enterprising investor wanted to add a seventh mechanical criterion to his choice, by considering only issues ranked by Standard & Poor’s as average or better in quality, he might still have about 100 such issues to choose from. One might say that a group of issues, of at least average quality, meeting criteria of financial condition as well, purchasable at a low multiplier of current earnings and below asset value, should offer good promise of satisfactory investment results.

In the last 20 years the “profitable reinvestment” theory has been gaining ground. The better the past record of growth, the readier investors and speculators have become to accept a low-pay-out policy. So much is this true that in many cases of growth favorites the dividend rate—or even the absence of any dividend—has seemed to have virtually no effect on the market price.

Size is more than ample for each company. Financial condition is adequate in the aggregate, but not for every company.2 Some dividend has been paid by every company since at least 1940. Five of the dividend records go back to the last century. The aggregate earnings have been quite stable in the past decade. None of the companies reported a deficit during the prosperous period 1961–69, but Chrysler showed a small deficit in 1970. The total growth—comparing three-year averages a decade apart—was 77%, or about 6% per year. But five of the firms did not grow by one-third. The ratio of year-end price to three-year average earnings was 839 to $55.5 or 15 to 1—right at our suggested upper limit. The ratio of price to net asset value was 839 to 562—also just within our suggested limit of 1½ to 1.

First, the dividend return is relatively high. Second, the reinvested earnings are substantial in relation to the price paid and will ultimately affect the price. In a five-to seven-year period these advantages can bulk quite large in a well-selected list. Third, a bull market is ordinarily most generous to low-priced issues; thus it tends to raise the typical bargain issue to at least a reasonable level. Fourth, even during relatively featureless market periods a continuous process of price adjustment goes on, under which secondary issues that were undervalued may rise at least to the normal level for their type of security. Fifth, the specific factors that in many cases made for a disappointing record of earnings may be corrected by the advent of new conditions, or the adoption of new policies, or by a change in management.

Be passionate about the business but dispassionate about the stock. Celebrate the big successes of your businesses and reflect on failures. A true feeling of ownership gives an investor the conviction to hold. When you think like a business owner, you no longer view stocks as pieces of paper or buy them with “target prices” in mind. Instead, you view stocks as part ownership in a business and you want to savor the journey alongside the promoters. As companies grow larger and more profitable, their stockholders share in the increased profits and dividends. Invest for the long term. Live fully today. Every day, millions of hardworking people around the world are doing great things at so many companies. As investors, we are thankful.

The first, or predictive, approach could also be called the qualitative approach, since it emphasizes prospects, management, and other nonmeasurable, albeit highly important, factors that go under the heading of quality. The second, or protective, approach may be called the quantitative or statistical approach, since it emphasizes the measurable relationships between selling price and earnings, assets, dividends, and so forth. Incidentally, the quantitative method is really an extension—into the field of common stocks—of the viewpoint that security analysis has found to be sound in the selection of bonds and preferred stocks for investment. In our own attitude and professional work we were always committed to the quantitative approach. From the first we wanted to make sure that we were getting ample value for our money in concrete, demonstrable terms. We were not willing to accept the prospects and promises of the future as compensation

Adequate Size of the Enterprise All our minimum figures must be arbitrary and especially in the matter of size required. Our idea is to exclude small companies which may be subject to more than average vicissitudes especially in the industrial field. (There are often good possibilities in such enterprises but we do not consider them suited to the needs of the defensive investor.) Let us use round amounts: not less than $100 million of annual sales for an industrial company and, not less than $50 million of total assets for a public utility. 2. A Sufficiently Strong Financial Condition For industrial companies current assets should be at least twice current liabilities—a so-called two-to-one current ratio. Also, long-term debt should not exceed the net current assets (or “working capital”). For public utilities the debt should not exceed twice the stock equity (at book value). 3. Earnings Stability Some earnings for the common stock in each of the past ten years. 4. Dividend Record Uninterrupted payments for at least the past 20 years. 5. Earnings Growth A minimum increase of at least one-third in per-share earnings in the past ten years using three-year averages at the beginning and end. 6. Moderate Price/Earnings Ratio Current price should not be more than 15 times average earnings of the past three years.

Although at one time a measure of a business’s prosperity, it has become a relic: stocks should simply not be bought on the basis of their dividend yield. Too often struggling companies sport high dividend yields, not because the dividends have been increased, but because the share prices have fallen. Fearing that the stock price will drop further if the dividend is cut, managements maintain the payout, weakening the company even more.

Another investor I know structured his portfolio of a few million dollars to produce income at the level he wished to spend. Accordingly, his portfolio consists mostly of short- and intermediate-term bonds, on which he pays a significant income tax. Curiously, he thinks he can only spend income, in the form of dividends and interest, and he views capital appreciation as something less real. I tried, and failed, to convince him that higher total return (after tax) means more money to spend and more money to keep, no matter how it divides between realized income and unrealized capital gains or losses. To own a stock like Berkshire Hathaway, which has never paid a dividend, and therefore produces no “income,” would be unthinkable for him. This investor’s costly preference for realized income rather than total return (economic income) is common.

For then, if another bull market comes along, he will take the big rise not as a danger signal of an inevitable fall, not as a chance to cash in on his handsome profits, but rather as a vindication of the inflation hypothesis and as a reason to keep on buying common stocks no matter how high the market level nor how low the dividend return. That way lies sorrow.

Legg Mason was a value shop, and its training program emphasized the classic works on value investing, including Benjamin Graham and David Dodd’s Security Analysis and Graham’s The Intelligent Investor. Each day, the firm’s veteran brokers would stop by and share their insights on stocks and the market. They handed us a Value Line Investment Survey of their favorite stock. Each company possessed the same attributes: a low price-to-earnings ratio, a low price-to-book ratio, and a high dividend yield. More often than not, the company was also deeply out of favor with the market, as evidenced by the long period the stock had underperformed the market. Over and over again, we were told to avoid the high-flying popular growth stocks and instead focus on the downtrodden, where the risk-reward ratio was much more favorable.

Yet so many investors do this with stocks because they view them as mere numbers on a screen. By engaging in such short-term behavior, you increase your likelihood of making poor decisions. Market timing is also not as easy as

stock’s value at any given time depends on how much another buyer is willing to pay for a share of that company’s stock, and how much the seller is willing to accept. On one hand, if the outlook for the company is good or improving, buyers might be willing to pay more than you paid for your share of stock, and if you sold it at the higher price, you’d make a profit. On the other hand, if you had to sell at a time when the price of the stock was lower than you paid, you’d lose money. Investors who decide to hold their shares of stock, rather than sell them, expect to profit from the dividends the company pays them from time to time, and/or from the increase in the value of their stock shares as the company (they hope) grows and prospers.

We lack space here to discuss in detail the pros and cons of market forecasting. A great deal of brain power goes into this field, and undoubtedly some people can make money by being good stock-market analysts. But it is absurd to think that the general public can ever make money out of market forecasts. For who will buy when the general public, at a given signal, rushes to sell out at a profit? If you, the reader, expect to get rich over the years by following some system or leadership in market forecasting, you must be expecting to try to do what countless others are aiming at, and to be able to do it better than your numerous competitors in the market. There is no basis either in logic or in experience for assuming that any typical or average investor can anticipate market movements more successfully than the general public, of which he is himself a part. There is one aspect of the “timing” philosophy which seems to have escaped everyone’s notice. Timing is of great psychological importance to the speculator because he wants to make his profit in a hurry. The idea of waiting a year before his stock moves up is repugnant to him. But a waiting period, as such, is of no consequence to the investor. What advantage is there to him in having his money uninvested until he receives some (presumably) trustworthy signal that the time has come to buy? He enjoys an advantage only if by waiting he succeeds in buying later at a sufficiently lower price to offset his loss of dividend income. What this means is that timing is of no real value to the investor unless it coincides with pricing—that is, unless it enables him to repurchase his shares at substantially under his previous selling price.

Remember, capital gains are taxed at a lower rate than dividends. Thus, some theorize, investors may prefer capital gains to dividends. This is known as the tax preference theory. Of course, capital gains are not paid until an investment is sold. Investors can control when capital gains are realized, but they can’t control dividend payments.

If you apply a price-to-dividend ratio analysis to stocks you are thinking of purchasing or already own, you can purchase, or reinvest, cash at optimal points in time. If Pepsi’s share price falls and the yield nears 4 percent, the investor could then time her purchases in the most efficient manner and gain the most shares of Pepsi stock possible. Following this type of market timing will allow an investor to collect more shares of a company’s stock at the times when it is most undervalued.

We define a bargain issue as one which, on the basis of facts established by analysis, appears to be worth considerably more than it is selling for. The genus includes bonds and preferred stocks selling well under par, as well as common stocks. To be as concrete as possible, let us suggest that an issue is not a true “bargain” unless the indicated value is at least 50% more than the price. What kind of facts would warrant the conclusion that so great a discrepancy exists? How do bargains come into existence, and how does the investor profit from them? There are two tests by which a bargain common stock is detected. The first is by the method of appraisal. This relies largely on estimating future earnings and then multiplying these by a factor appropriate to the particular issue. If the resultant value is sufficiently above the market price—and if the investor has confidence in the technique employed—he can tag the stock as a bargain. The second test is the value of the business to a private owner. This value also is often determined chiefly by expected future earnings—in which case the result may be identical with the first. But in the second test more attention is likely to be paid to the realizable value of the assets, with particular emphasis on the net current assets or working capital. At low points in the general market a large proportion of common stocks are bargain issues, as measured by these standards. (A typical example was General Motors when it sold at less than 30 in 1941, equivalent to only 5 for the 1971 shares. It had been earning in excess of $4 and paying $3.50, or more, in dividends.) It is true that current earnings and the immediate prospects may both be poor, but a levelheaded appraisal of average future conditions would indicate values far above ruling prices. Thus the wisdom of having courage in depressed markets is vindicated not only by the voice of experience but also by application of plausible techniques of value analysis.

Few Can Stick with 100% Stocks Long-Term Let's say you invested $100,000 into the S&P 500 in January 2007 then slipped into a coma for ten years. When you woke up, you would have been delighted to see your money at $195,000. If you had remained conscious, you would have watched your account value cut in half by May of 2009 . Would you have been able to watch your account fall by 50% and still held on? Or would you have panicked and sold at the bottom?

Which factors determine how much you should be willing to pay for a stock? What makes one company worth 10 times earnings and another worth 20 times? How can you be reasonably sure that you are not overpaying for an apparently rosy future that turns out to be a murky nightmare? Graham feels that five elements are decisive.1 He summarizes them as: the company’s “general long-term prospects” the quality of its management its financial strength and capital structure its dividend record and its current dividend rate.

Security Analysis” by Benjamin Graham, “The Single Best Investment” by Lowell Miller, “The Snowball Effect” by Timothy J McIntosh, “Berkshire Hathaway Letters to Shareholders” by Warren Buffett and Max Olson, “The Ultimate Dividend Playbook: Income, Insight and Independence for Today’s Investor” by Morningstar and Josh Peters.

Each company should have a long record of continuous dividend payments. (All the issues in the Dow Jones Industrial Average met this dividend requirement in 1971.) To be specific on this point we would suggest the requirement of continuous dividend payments beginning at least in 1950.

Take the five stocks in the Dow Jones Industrial Average with the lowest stock prices and highest dividend yields. Discard the one with the lowest price. Put 40% of your money in the stock with the second-lowest price. Put 20% in each of the three remaining stocks. One year later, sort the Dow the same way and reset the portfolio according to steps 1 through 4. Repeat until wealthy.

Instead, let’s tune out the noise and think about future returns as Graham might. The stock market’s performance depends on three factors: real growth (the rise of companies’ earnings and dividends) inflationary growth (the general rise of prices throughout the economy) speculative growth—or decline (any increase or decrease in the investing public’s appetite for stocks)

The real money in investment will have to be made- as most of it has been in the past- not out of buying and selling but of owning and holding securities, receiving interest and dividends and increases in value. pxvii

the interest and principal payments on good bonds are much better protected and therefore more certain than the dividends and price appreciation on stocks.

Questions to ask when analyzing a business Business - How does the company make money? - Does it seem like it should be a good business? Is it competitive? Do suppliers have too much power? Do customers value the product? Are there substitutes? - Without looking at financials, how does the company seem like it has done against competitors in its industry in terms of executing on its vision? - What reputation does the management team have? Do they seem honest? Straightforward? Valuation - What is the company's P/E multiple? Is it high or low for its industry? For the overall market right now? Why might the stock be trading at this valuation? - What is the company's free-cash flow yield? Is this a relevant metric given the stage the company is in? How does it compare to similar companies? - Is the company growing faster or more slowly than other companies with similar multiples? - Based on the number alone, does the company seem to have a rich valuation or a cheap valuation? Why might this be the case? Financials - What has been the trajectory of revenue growth over the past ten years? Why? What is it expected to do in the future? - How has the company's industry been growing? Is the company gaining or losing share in its industry? - What is the company’s level of profit margins? How does it compare to other companies in its industry? - How have margins varied over the past ten years? Why? - What percentage  of the company's costs are fixed costs versus variable costs? - What is the company's historical return on capital? Why is it high/low? What does this say about the quality of the business? - What is the trend in returns on capital? Why? What does this say about the returns the company will have to make on its future investments? - What is the company's dividend policy? Why? If they are paying no dividend or a small dividend, is there a danger that the company's management will waste shareholder's money? Technical - How have the company's shares performed against the overall market and its industry over the past twelve months? - What seems to be driving this under/over performance? - What key news events are likely to impact the stock in the future? - Do mutual funds and other large institutional investors seem to be buying or selling the shares? Sentiment and Expectations - What are the consensus earnings estimates for the next quarter and year? Do they seem aggressive or conservative? - Does consensus opinion seem overly bullish or bearish about the company's future prospects? - What insight do you have that the market might be missing that will cause the shares to appreciate?

Chambers et al. conclude that Keynes had no skill as a market timer. By then, however, the man who had started out as a top-down speculator relying upon his “superior knowledge” to forecast the macroeconomic climate, was behaving more like a bottom-up, fundamental investor who sought solid, dividend-paying stocks with good long-term prospects. His gains came from taking large positions in those securities that had financial statement sheets he could understand, and sold products or services he believed he could assess objectively.

Take the five stocks in the Dow Jones Industrial Average with the lowest stock prices and highest dividend yields. Discard the one with the lowest price. Put 40% of your money in the stock with the second-lowest price. Put 20% in each of the three remaining stocks. One year later, sort the Dow the same way and reset the portfolio according to steps 1 through 4. Repeat until wealthy. Over

This is the last chapter of the book, but it is the beginning of your journey in becoming a super hero. Super heroes possess extraordinary abilities and skills that leave the average human jealous, speechless, and in awe. They also have the uncanny ability to stay calm, cool, and collected in the face of danger, while everybody else is panicking. While doing their normal day activities they might also blend in with the crowd and not stand out at all. But when duty calls, they can switch into super hero mode as fast as lightning.

implied that “at normal levels of the market” the investor should be able to obtain an  initial  dividend  return  of  between  31⁄2%  and  41⁄2%  on  his  stock purchases, to which should be added a steady increase in underly- ing value (and in the “normal market price”) of a representative

Rule 1: A rational investor should be willing to pay a higher price for a share the larger the growth rate of dividends and earnings.

The wages of the factory workers were cut by a quarter, while their rent in the company town remains the same,” Jordan explained. Naomi added, “Mr. Pullman claims it was necessary due to the depression, but only the workingmen are affected, and the investors got a full dividend.” Jordan asked, “Do you believe the rumors of a strike?

Dividend investing is a great strategy for individuals from all walks of life who want to build wealth and achieve financial freedom. It can be a very rewarding approach for investors looking to generate income or build wealth by reinvesting dividends received. In addition, dividend investors can expect to see appreciations in the price of their stocks; and this appreciation is known as capital gains or capital appreciation.

Developing and maintaining strategies to survive secular bear markets is the most important consideration any prudent investor can have.

When a shareholder invests for dividends, the investor does not have to sell their assets, because they will live off their dividends that the asset pays them. Also, many dividend companies still pay out an increasing dividend even during a market crash.

A great company, in the context of buying it as an investment, is a company that consistently generates a healthy net income. Not only that, it should also be able to increase its net income year after year. The net income of a company is the bottom line, it's what's leftover after all the expenses, interest, and taxes have been deducted from the revenue the company generated. Total revenue generated has an impact on the net income of a company.