DIVIDEND: Because You Will Need One to Survive

How do you feel about taxation without representation? Not good, right? How about working your day job for an IOU? Exactly. Not going to happen.

But that’s what we see with most tech stocks these days. You have management giving away stock options to retain employees and to goose their own net worth, living on a prayer that the stock price will go up.

And the average investor, day trader? They’re not raising money for companies. Please. They’re trading. It’s a zero-sum game.

This will change.

There was a time when investors demanded a cash return on their money in the form of dividends. They made up about half of investors’ returns. The discipline of a dividend on a company put the common shareholder in an uncommon place today: the corporate boardroom. He quietly sat there (not that quietly) as a reminder that “Hey, we’re the owners of your common stock and demand a cut of (our) earnings.”

This was a time when cash was king because it was needed. Cash was like gold. Businesses needed it for manufacturing. It wasn’t the low cash environment of America’s current service economy. And yet they figured out how to pay that dividend every single quarter. Shocking when you think about the cash on hand at companies today.

Nowadays, some are waking up from a long winter’s nap to see that outsourcing America’s manufacturing base to China was probably not a great idea. When I was at Babson College in the early 90s, it was all about globalization. Now, after Covid, the supply chain disasters, and the war drums beating, it’s starting to dawn on many that maybe outsourcing wasn’t the best security option for the country.

Look for outsourcing to reverse in some cases and redirect away from China.

And look for investors to change their tune, too. Begrudgingly. But losing money has a way of changing minds.

There will come a time when investors demand to be paid for letting go of their hard-earned cash. They will grow tired of stagnant stock prices and increasing living expenses. They will want a cash dividend because they will need one to survive.

Action Line: There’s plenty of cash to be shared from the hoards the tech lords are sitting on, like Smaug from The Hobbit. When you’re looking to be paid a dividend for your investments, then let’s talk. The time to prepare is now, not later.

Originally posted on Your Survival Guy.