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Arthur Q. Johnson, CFA
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Arthur Q. Johnson, CFA is founder and President of A.Q. Johnson & Co., Inc., a registered investment advisory firm that manages the Mundoval Fund, ( a no-load, global value equity mutual fund, as well as individual portfolios for high net worth and institutional clients. He is a... More
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Mundoval Fund
  • Dividends: Getting Paid to Wait 0 comments
    Dec 16, 2011 12:28 PM
    What exactly is a dividend? When a company is profitable, it's board of directors may decide to distribute some of the earnings to shareholders in the form of a dividend. Dividends are typically paid each quarter and are often cash, but may also be stock or other property. Companies are not required to pay a dividend, and smaller businesses looking to grow will often plow all earnings back into the business instead of offering a dividend. More mature businesses, on the other hand, tend to pay a dividend, giving investors an incentive to own stock in a stable company that may not be growing as quickly.

    What is “dividend yield”? The dividend yield is a percentage value indicating the value of the dividend compared to the value of the stock. Dividend yield is calculated by dividing the amount a company pays in dividends per share each year by the price of one share of stock. For example, a company that pays $4 in dividends each year and trades at $80 per share has a dividend yield of 5%.

    Must a company pay a dividend to be in the Mundoval Fund (MUTF:MUNDX)? No, but they often do. As value investors, we seek to buy quality companies at a good price. And in our estimation, a quality company is one that generates plenty of cash and is run by shareholder-focused managers. Profitable companies that prioritize shareholders are likely to pay a dividend.

    How do I benefit from the dividend-paying stocks in the Mundoval Fund? We generally use dividends in one of two ways: on occasion, we reinvest the dividend by purchasing more shares of the issuing company, but more often we use the dividend to buy shares of another company we feel is a solid investment. Either way, dividends let us build the fund’s position in companies we like without allocating any new capital. Also, we invest with a long time horizon often spanning several years and are willing to be patient as the market realizes the intrinsic value of our holdings. The steady income from a dividend rewards our patience; we get “paid to wait.”

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: You should consider the investment objectives, risks, and charges and expenses of the fund carefully before investing. The prospectus contains this and other information about the Fund. You may obtain a prospectus by visiting our website at or by calling 1-877-59-FUNDS.The prospectus should be read carefully before investing. I am the portfolio manager of the Mundoval Fund (MUNDX)and am long a position in the fund.
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