05-05-2017, 12:53 PM
personally, I really don't care. I do look into it, to see what they have done in the past, but it's not something that has a big effect on my investment decision. I don't even mind it if they have a year or two or no increase... it all depends on why it happened.
I've always been a bit skeptical of the "need" to increase the dividend payment every year. I certainly agree that, over the long term, the dividend has to increase but the fact that is should be once per calendar year or once per 4 quarters is often just companies increasing it to keep the streak going, rather than increasing it because they see it as the best use of their cash. I believe a company should use their cash in a way that the management believes will be the most beneficial for the shareholders.
I'll throw a few examples out here.
Big oil companies. The price of oil plummeted, and certain companies decided to keep the dividends as it is (or even increase it). They couldn't really afford to do so, but they figured to take debt and pay with that money, just to keep the streak going. Seems a bit silly to me to take debt in order to distribute cash to shareholders... the government has a habit of taking their fair (or not so fair) share as tax, so in the end you're just losing cash this way.
Another example is a situation where, for some reason like a global recession, a company is doing badly for a moment. They aren't making much money, and so the stock price has also plummeted. If they believe the situation will correct itself... wouldn't it be WAY more beneficial to the shareholders to use the extra cash to buy back their own stock at ridiculously low prices, rather than dishing it out to the owners just to keep the streak going?
We all love dividend increases, but just because they are not exactly 365 days apart doesn't necessarily mean that something is wrong.
I've always been a bit skeptical of the "need" to increase the dividend payment every year. I certainly agree that, over the long term, the dividend has to increase but the fact that is should be once per calendar year or once per 4 quarters is often just companies increasing it to keep the streak going, rather than increasing it because they see it as the best use of their cash. I believe a company should use their cash in a way that the management believes will be the most beneficial for the shareholders.
I'll throw a few examples out here.
Big oil companies. The price of oil plummeted, and certain companies decided to keep the dividends as it is (or even increase it). They couldn't really afford to do so, but they figured to take debt and pay with that money, just to keep the streak going. Seems a bit silly to me to take debt in order to distribute cash to shareholders... the government has a habit of taking their fair (or not so fair) share as tax, so in the end you're just losing cash this way.
Another example is a situation where, for some reason like a global recession, a company is doing badly for a moment. They aren't making much money, and so the stock price has also plummeted. If they believe the situation will correct itself... wouldn't it be WAY more beneficial to the shareholders to use the extra cash to buy back their own stock at ridiculously low prices, rather than dishing it out to the owners just to keep the streak going?
We all love dividend increases, but just because they are not exactly 365 days apart doesn't necessarily mean that something is wrong.