I received an interesting private question from a reader recently, asking me what I thought was the best argument against blue-chip dividend investing. I loved that question, and with his permission, I included parts of my answer below.
When you think about owning a diversified basket of high-quality assets for a long period of time, one of the virtues of the strategy is that it is almost fail-proof. Part of me wants to reach out and say, “Yeah, well, maybe during a WWII type of event, the dividend payouts might stop.” I have no idea what will happen during the outbreak of the next war, but here is what I do know: When Germany was streaking across Europe and launching air attacks on the British empire, the highest quality companies in the world continued to make their payouts. General Mills, AT&T, General Electric, Hershey, Colgate-Palmolive, IBM, and the offspring of the Standard Oil managed to return cash to shareholders throughout the 1930s and 1940s (that’s the wild fact—the financial crisis of 2008-2009 did to GE shareholders what the Reichstag and its Chancellor couldn’t do).