I have recently been working my way through Howard Schilit’s book “Financial Shenanigans” which teaches intermediate investors the skills to identify companies possibly engaging in accounting behavior that would make Enron executives blush.
One of the things that Howard Schilit pointed out in his very informative work is the fact that companies cannot fake a dividend. Taking that logic one step further, they really cannot fake a growing dividend.
This makes sense at an intuitive. Imagine you are a slimeball executive trying to swindle thousands of hardworking, honest, decent shareholders out of their money by siphoning off funds from the company or overstating profits. By definition, these management teams that are engaging in fraud are overstating profits (either by artificially claiming the profits are higher so that the stock price will go up, or by stealing from the company to fund a lavish lifestyle). In either case, you want to … Read the rest of this article!