prudentinvestor

Dividends or No Dividends, That Is the Question

In the 70's and 80's, dividends used to be the primary reason investors bought stocks, before growth mania took over as the era of the great bubbles developed. As the back-to-back bubbles started in the 90's, pundits began to deride dividends as antiquated and stodgy.

Now that investors have finally perceived that the bubble era was just an illusion of unsustainable valuations growth, dividends are back in vogue. When people find that a stock is still worth what they paid ten or fifteen years ago, the only thing they have to show for their investment is dividends.

In the post-bubble era, dividends are back to stay, and companies that don't pay them, or reduce them, will see their stock values fall.

S&P 500 Dividend Aristocrats: Past, Present and Future

I had a position in KO for some years and was satisfied with the stock's performance. However, when it got to the mid-60's, I thought it was much too high and sold it and bought higher yielding stocks instead.

Part of my reasoning was that the novelty of people buying bottled water, instead of drinking it from a tap or fountain, will fade because (a) unnecessary spending in a recession,(b) articles in various media claimed that bottled water is no better than tap water, (c) uses lots of energy to make bottles and transport them, and (d) it was a silly fad anyway.

I confess I did not look into what percentage of KO profits came from selling water in bottles, but assumed it is significant as you see their water everywhere, and being more expensive than coke must be highly profitable.