Sunday Afternoon Musings on DGI: ”Dividends – ‘10 Things I (Don’t) Hate About You’”

Investors of a certain age may remember the 1999 teen rom-com movie, ‘10 Things I Hate About You’ starring Julia Stiles and Heath Ledger.   The film is an adaptation of “The Taming of the Shrew” by William Shakespeare.

The two main characters initially don’t like each other but ultimately get together.  In one of the final scenes, Julia Stiles’ character recites a poem to Heath Ledger’s character titled “10 Things I Hate About You”, which, in contrast to the title, is actually her profession of her love to him.

The end of the poem reads:

“But mostly I hate the way I don’t hate you;
Not even close, not even a little bit, not even at all.”

So in that vein, here are the “10 things I (Don’t) Hate About Dividends”:

1. Passive income.  Sounds obvious, but this is very much underrated. This term gets thrown around a lot lately, especially on social media, but I have not found a single better source of passive income.  No phone calls, no broken items to fix, etc.  You buy quality companies or funds, they do the work, and the dividends come in like clockwork, without you having to do anything.
2. Live off the dividends.  Many investors plan on selling off their investments to live off of.  4% rule anyone?  These investors have to sell shares to get income.  Dividend investors get the income and keep their shares, indefinitely.
3. Legacy.  Instead of selling down assets to live off of, dividend investors can pass the investments to their kin or charity since we are not using the money, just the dividends.
4. Dividends Don’t Lie.  As the late, great, Geraldine Weiss said in her book by the same title, dividends can’t be manipulated.  The company either has the cash to pay or not.  A company that can pay and raise their dividend – with cash – can show how strong they really are.  No accounting tricks or financial engineering, cash is king.
5. No Babysitting.  After doing the initial research, I do not have to focus on a daily or weekly basis on what my company is doing, what new product is launching (or not launching).  A lot of growth -focused companies can be seriously affected in the short term by missing a deliverable.  Dividend companies tend to be established companies and growth is more stable. 
6. Greater Fool Theory.  Traditional stock investing relies on you being able to sell your shares to the “greater fool” at some point in the future in order to profit.  With dividends, you are relying on the company management and Board to make the decision to pay you, not another investor.
7. Easier to plan.  Instead of worrying about the total balance of your investments, you can focus on the growing stream of dividends as your goal.  We can control that, we can’t control the price the market is willing to pay for a stock.  Markets go up and down, a lot and often.  How can you plan your future around that.  I can be certain that a basket of quality dividend companies will continue to pay and raise their dividends, which allows me to plan better for my future.
8. Compounding and dividend growth does the heavy lifting.  My dividends are making money, and that money makes more money.  All through the wonderful magic of compounding.  Additionally, the companies I invest in raise their dividend, supercharging this growth.
9. Paid to own great companies.  As a dividend investor, and as an owner of great businesses, the company shares its earnings with you, the owner.  Just like if you owned your own business, you get a portion of the profits each year. 
10. Superior returns.  Dividends have historically made up 40%+ of the total returns of the market over time.  Additionally, dividend growers have out-returned non-dividend payers.  Better total returns and passive income, sounds like something to love.