10-03-2016, 05:16 PM
(10-03-2016, 03:44 PM)Kerim Wrote: As much as I love the deeply built-in expectation of dividends that rise every year, I've always been a little skeptical of the logic underneath it. From a business management perspective, it seems much more rational to say "we're going to return X percent of profits to shareholders as dividends." Yes, shareholders might not like the volatility of dividends that fluctuate with profits, but management would be free to run the business for the long term without taking on unnecessary debt to avoid the ire of shareholders.
Agree 100%
Also in the end DGI is about getting a growing dividend from the portfolio, not from each and every single company in the portfolio. Well at least that's the case for me. I don't mind it if, for acceptable reasons, one of my holdings reduces it's dividend, or keeps it the same. Still, with reinvested dividends and the majority of the companies in my portfolio making a dividend increase, the overall income will increase.
I do own some companies from Europe and there the trend in general seems to be "dividend paid out will be between X and Y percentage of EPS" which does result in a fluctuating dividend. However, so far, I've never had a year where my total dividend income would be less than the year before. Though I must admit that is because I do own a lot of safe and stable dividend growers from north america, but it's just there to prove that one or two decreases (as long as it's for acceptable reasons) won't bring down your whole portfolio.