10-15-2013, 08:31 AM
It is one of the many reasons that I prefer dividend growth stocks in the first place. As many have observed, companies can tinker endlessly with earnings, but dividends can't be faked -- it is cold hard cash in my account. A dividend that grows steadily over the years indicates good health and -- I hope -- also indicates that earnings are indeed growing.
Of course it is a bit of a chicken and egg problem, and it would be immensely reassuring if earnings were completely clear and transparent, because a past dividend raise can come by increasing the payout ratio instead of growing earnings.
All of these are reasons that I prefer simple businesses, with a bias to consumer staples, that have raised the dividend for many years.
Of course it is a bit of a chicken and egg problem, and it would be immensely reassuring if earnings were completely clear and transparent, because a past dividend raise can come by increasing the payout ratio instead of growing earnings.
All of these are reasons that I prefer simple businesses, with a bias to consumer staples, that have raised the dividend for many years.