More stocks should pay out bigger dividends / by kevin murray

Investors and institutions invest their money into stocks for all sorts of reasons, but certainly the primary reason for most everyone, is to make or to earn money on that investment.  When it comes to stock investment, common stockholders seldom have much of a say whatsoever as to what a given Board of Directors or the Executive office, will or won't do; however, there are fundamental ways to protest one's dissatisfaction with the current state of things, of which, one of them is to pay more attention to the dividend payouts, if any, and the amount of such to stockholders.


The reason that dividends should matter to investors is that as shown by, the total returns for the S&P 500, "… with a 20 year holding period dividends account for some 60% of total returns," which is an astonishingly high percentage and demonstrates the incredible value of stocks that do provide dividends, of which, it is estimated that in total, only about 40% of the stocks publicly traded currently offer dividends.  However, the thirty stocks that represent the Dow Jones index, which are considered to be a fair cross-section and fair representation of the most valuable stocks representing the U.S economy, every one of those stocks, currently provides a dividend.


Every public company has both income as well as expenses, of which, those corporations that are profitable, have a conscious choice to make as to whether to pass on to their shareholders in the form of a dividend, some of those profits, throughout the year.  The advantage for a stockholder receiving a dividend is that the money received represents real income, of which, people will utilize those dividends to help make ends meet, or to increase their assets, or for additional investments, and so forth, of which, all of this happens, without the stockholder having to do a thing, other than to maintain their ownership of that particular stock.


Another thing to consider about dividends for companies issuing them is that, dividends can be suspended or reduced, as need be, per business conditions, so that, companies, recognize that, if necessary, they can reduce their expenses, by reducing their dividend payout.  Of course, many companies make it a point not to reduce their dividends at all, and rather try to actually modestly increase them each year, recognizing that stockholders truly do appreciate consistency and reliability.


Of course, there are plenty of companies that could pay out dividends that do not, or could pay out bigger dividends but do not, of which, the most common excuse for not doing so, is that they need to take the money earned and instead such must be prudently re-invested in the company; but that is often belied by the staggering amounts of liquid money that companies such as Apple has, with an estimated $237 billion of cash on hand, of which, they could easily reward their stockholders with bigger dividends, but have not done so.


For those that invest in common stocks, there are only two ways that money will be made, and that is through stock appreciation and the other is through dividends received.  The thing about stock appreciation is the money "made" is the proverbial money made on paper, whereas dividends are real money received by the stockholder and as that bird in hand, should not be discounted in its importance or its value, and therefore should be the focus of any good investor.