"The Common Financial Culture that Devalues Stock Dividends Contributes to Companies Devaluing Stock Dividends"

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If you read financial magazines, how often do you see headlines such as, "The 5 Stocks to Buy Now"?

A lot.

And don't you understand, subconsciously even if you don't think about it, that what they're really saying is, "5 Stocks We Think Will Go Up in Market Price Fast, Before We Recommend More Stocks for You to Buy Next Month."

Don't you understand instinctively, that when some financial news analyst on TV tells you, "Hi-Tech, Incorporated is a buy," that they're talking about its market price?

NOT the dividends Hi-Tech will pay?

Mainstream Investment Philosophy Overrates Capital Gains

Financial magazines may occasionally run articles about stocks that pay high dividends, but the overall financial culture is all about capital gains

And it's been that way at least 30 years.

When was the last time a broker called you up with a hot tip -- "Hershey Chocolate is raising their dividends again."

What a joke.

Dividends are Growing in Popularity

Sometimes it seems that very few people care about dividends any more, but in the wake of the 2007-2009 financial crisis more people are waking up to their importance.

Yes, on average they're very low (although on the rise).

Even my mother pays more attention to her paper net worth than to her net income. I keep telling her, "Mom, the prices fluctuate every minute. Who cares, as long as the dividend check doesn't bounce?"

It's human, but if we buy The Wonderful Acme Company for $50 a share and it goes to $45, we feel we lost money . . . even though they pay a good dividend.

The concept of winning through capital gains / stock market price appreciation is embedded in our minds deeply.

It's Time to Question This Inattention to Income Investing

Market prices DO fluctuate by the minute, heck by the second.

What's up today could be down tomorrow. Or vice versa. Or up more. Or down again.

Dividend Paying Stocks are Worth Their Dividends, Not Their Market Price

You're buying the right to receive their dividends.

If the company doesn't pay dividends, don't buy it.

As long as they continue to pay an ever-increasing amount of dividends, keep the stock.

You're buying shares of stock. 100 shares will remain 100 shares whether the market price goes up or down.

Market Price Is Only Important If You Decide to Sell the Stock

As long as it's paying an ever increasing amount of dividends, you should never sell it.

Somebody once asked Warren Buffett how long he likes to hold stocks.


Warren Buffett Sells Companies Only After Givign Up on Them

Until then, hang on.

If you sell at a profit, you have to pay taxes.

If you sell at a loss, you have less money than you and zero shares and therefore zero right to receive dividends, which is the goal.

So you should only sell when you realize you're stuck with an Enron that's about to go out of business and it's better to sell and get whatever you can.

Sell Only When the Dividends or the Company Stop

But that should be an extremely rare occurrence

I can't promise it won't, so that's why I made diversification a goal. If one revenue stream goes bad, you've got more.

Did Enron even pay dividends? I could be wrong, but I doubt it. I doubt Ken Lay wanted to pay out the company's precious cash to investors.

Companies paying out ever increasing dividends tend to be much better managed than companies that investors buy for "growth."

They can't artificially jack up revenue or hide liabilities behind accounting smokescreens. They have to pay out real checks that clear the bank.

Paying Dividends Takes Real Cash, Not Accounting Smoke and Mirrors

Nobody can promise you that no high dividend-paying company will ever mismanaged or go out of business.

But the chances are much lower than with growth companies.

Dividend Checks Reward Your Investing

So my advice is, every time you hear the media and your friends talking about stocks going up, pinch yourself to remind yourself that they're talking about market prices.

Capital gains.

Price appreciation.

Which could disappear tomorrow.

You're After an Ever-Increasing Stream of Dividends

Forget about the market price.

You can't get the capital gains without selling the stock, and then you lose the stream of income.

That's what I've figured out that nobody else dares to tell you.

Realizing Capital Gains Means Selling the Stock

You cannot spend capital gains without selling the stock, and (unless it's an Enron) you should not be selling it.

So long as the company is paying you an ever-increasing amount of dividends every quarter -- the market price is irrelevant.

If it goes up, you'll feel good over something that's of no concrete benefit to you. And when it goes down, you'll feel justified in feeling bad.

Forget it. Keep receiving the dividend checks. That's what you bought the stock for -- an ever increasing stream of income that lasts longer than you do.

There're no guarantees, but good companies that pay dividends have the best chance of continuing to exist and pay dividends far into the future . . . past your death . . .

The investment choices you make now may not only give you a pleasant and secure retirement, but make you a hero to your great great grandchildren.

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