Certainly individual companies can do dumb things and have to cut the dividend and companies can pay dividends from borrowed money instead of actual cash flow earnings (also dumb because it is unstainable over a long term - very short term, it has been known to work well). IF they drop the dividend - sell the stock. If the 10K makes you uncomfortable - think about selling the stock. No one says that you have to hang on to a bad company.
None of that takes away from the simple historical fact that dividend paying companies are the best place to have your money long-term.
Jeremy Siegal did a long term study of different investments and how they did. He found that:
$1 invested in Gold in 1802 was worth $32.84 at the end of 2006.
$1 invested in T-Bills (interest re-invested) was worth $5,061.
$1 invested in Bonds was worth $18,235.
$1 invested in common stocks (dividends re-invested) was worth more than 12.7 Million Dollars.
You do not have to invest for 200 years to get these returns. They are remarkably consistant over decade terms also.
Now the next thing to focus on is RISING dividends - not just any company that pays dividends. Ned Davis research points out that stocks with rising dividends for at least 5 years - beat the market every year between 1972 and 2008:
S&P 500 stocks grew by 6.2%.
Stocks with a fairly steady dividend grew by 6.3%.
Stocks with 5+ years of rising dividends grew by 8.9% total return.
The point should be clear by now. Think about it. That extra 2.7% return annually makes a HUGE difference over the long-term. Jun 07 12:36 PM