A reason why I cover businesses that have upped their dividend payouts annually for years and years is because it touches upon the nerve of permanent wealth creation–timeless demand for the core product. When I point out that Colgate-Palmolive has raised its dividend every quarter since the day on which President Kennedy, C.S. Lewis, and Aldous Huxley simultaneously died, I am not only sharing the insight that it is attainable to own something that sends you more and more cash each year.
I am also pointing out that the growing dividend payout ratio is telling you something about the products being sold. Toothpaste in general, and Colgate toothpaste in particular, is so enmeshed in the human experience that Colgate’s Board of Directors have been able to part with about a third of profits every year while not only maintaining its competitive position but improving upon it. An impressive dividend growth record is a signal that: “Our economic engine isn’t a vulture that licks the investor’s capital to the bone. There’s plenty here to go around and prosper.” Decades of dividend growth signal that the reinvestment needs of the business are low to manageable.