Another truism about markets is that there will always be uncertainty. There is no “sure thing” and anyone that tells you differently is suffering from delusions. The markets over the last 100 years have demonstrated [even throughout all their vicissitudes—the unexpected and the unforeseen] that sound investment principles produced generally sound results. While you may not be able to count on the returns from stock appreciation, something more bankable is the returns you get from dividend payments. Dividends are the closest thing you get in the stock market to a “sure thing.” They aren’t guaranteed, but they are predictable. A company can always lower its dividend or in extreme cases omit it under financial difficulties. Nonetheless, most dividends arrive like clockwork every month or quarter. They are bankable and you don’t have to sell a stock to receive the cash.

What’s important to investors is that dividends offer several advantages. They enhance investors’ returns over longer periods of time. Dividends make the difference between superior performances in both bull and bear markets. They can lower risk by creating greater stability in fluctuating markets, since dividend paying stocks hold up much better during periods of market uncertainty. They can also produce positive results when markets are unfavorable.

Dividend investing goes out of style when markets are going through a period of euphoria. They come back into favor after a decline. Following the stock market crash of 1929 dividend investing would remain in favor throughout the 40′s, 50′s, and 60′s. Throughout this period investors bought stocks because of their dividends. Since stocks were considered to be a riskier class of investment, they offered investors higher returns. Most of those returns came through dividends. Investors wanted actual cash—not a future promise of higher earnings down the road. It would surprise most investors to learn that stock dividend yields were higher than bond yields throughout most of the last century. After the stock market crash in 1929, dividend yields rose to 10% and remained high and above bond yields until the 1960s. They rose again during the bear market of the 1970s.

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