Dividend Is The King. 7


Crown_of_George_XII_of_GeorgiaQuite a lot of people do not know what dividends are. What I know for sure is that dividend is one of the sweetest things in the world. Dividends are payments (Cash or their stocks) paid to the shareholders from the company you own their share of. For example, if you have 100 shares of ‘DivKing’ company and DivKing just paid a quarterly dividend of $1 per share then you got paid $100 or $100 worth of their shares.

Is there a risk? Of course there is. There is no guarantee that the company keeps paying the dividend. The companies do not have to pay dividends if they decide not to. There is no legal obligation to pay out dividends. If they hit a temporary pothole then they may reduce or suspend the dividend until the pothole is filled. They may completely stop dividend payment if they fall into a long term slump. No one can guarantee whether dividends from a company will be continued to be paid in the future. However the risk is smaller than other companies that do not pay dividends at all and most of good quality companies are hesitant to decrease dividends as that signals lower stock price. When companies increase their dividends to attract more investors, they know that they can afford it.

Why do I love dividend so much? Because they are paid in cash regardless of the stock price fluctuations. I personally think stock prices are determined as 50% fictional psychology build up and 50% of actual performance of companies. However dividend payment isn’t fictional. It is real cash payment to your hands. Many stable companies pay 2-4% of annual dividend which isn’t really a lot however those companies have a great tendency of increasing their dividends every year which means that 2-4% of dividend will get higher every year. An increase in dividend is very positive sign that the company is on the right track and financially stable. The most importantly, you will get paid every year. What did you have to do to get paid every year? Absolutely nothing.

I have listed some of the great US and Canadian companies that have increased their dividends for at least 20 years. They are typically called ‘invest and forget’ companies.

US

  1. 3M company- 57 years streak of dividend increase, Current Div yield is about 2.50%
  2. AT&T Inc- 31 years streak of dividend increase, Current Div yield is about 5.6%
  3. Chevron Corp- 27 years streak of dividend increase, Current Div yield is about 3.82%
  4. Coca Cola- 52 years streak of dividend increase, Current Div yield is about 2.89%

Canada

  1. Fortis Inc- 41 years streak of dividend increase, Current Div yield is about 3.49%
  2. Canadian Utilities- 32 years streak of dividend increase, Current Div yield is about 2.62%
  3. Ensign Energy Services- 20 years streak of dividend increase, Current Div yield is about 4.71%
  4. Imperial Oil- 20 years streak of dividend increase, Current Div yield is about 1.04%

There are so many other great companies that you can utilize ‘invest and forget’ strategy which will be introduced in the near future on my other posts.  The dividends are not guaranteed and no one can tell the future however the companies that are listed above and will be introduced in the future make me comfortable that I will be collecting my dividend payments without much problems and guess what? I will be doing absolutely nothing to get paid. Don’t forget, dividend is the king and should be the key of your investment portfolio.

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