Dividend Investing In The Context Of Your Life


I spent much of the last evening reading a biography on Judy Garland (Dorothy from The Wizard of Oz). I was surprised to learn, at least from the biographer’s point of view, how sad and unhappy most of Judy’s life on this earth turned out to be. A lot of her personal unhappiness, from what I could tell, was the result of trying to find permanence and stability in her romantic and platonic relationships that were constantly shifting and leaving her feeling vulnerable. To mix metaphors from the lyrics of Bob Dylan, she tried to seek a shelter from the storm and was left with an abandoned love.

One of the things that brings me immense satisfaction about investing is that it is the one area of life (if you do it intelligently and conservatively) where the passage of time almost automatically signals that things are getting better. Everything else in life is just so…ephemeral in nature. The dynamic nature of human relationships, careers, the aging process, and so on force us to often think in terms of “snapshots in time” instead of permanence. With most things, you have to enjoy the moment while it lasts.

What I like about owning excellent companies is that it is one of the few things in life where you can do be assured that things are going to be constantly improving and getting better with time.

Stanley Black & Decker, Standard Oil (now Exxon, Chevron, Conoco, and a host of others), General Mills, Lorillard, and Colgate-Palmolive have all been paying out dividends since the 1800s. If your great-granddaddy bought a 100 share block of General Mills stock, he could have collected cash dividends on it every ninety days for the duration of his life. Then, when he passed, he could have passed that General Mills stock on to his son. He, in turn, could have enjoyed cash checks from General Mills every ninety days for the duration of his life. By the time he died, he could have passed that General Mills stock on to your dad, and he could have received a growing stream of cash in the mail, paid in regular installments every three months. Eventually, that money could have worked its way into your hands.

Generations of your family could have made their earthly experience easier if someone in your ancestry got the ball rolling and accumulated an excellent cash generator with the Charlton Heston attitude of “you can pry these dividend machines out of my cold, dead hands.” Someone has to get it all started: Why not you???

That is why I love dividend investing. When you own an excellent business, everything gets better with time. It is such a welcome reprieve from the rules that govern the rest of our daily living. Imagine if, in 2009, you got an asset like Johnson & Johnson on your family’s books.

In 2009, you got a $0.46 check sent every ninety days for each share you owned.

In 2010, you got a $0.49 check sent your way every ninety days for each share you owned.

In 2011, you got a $0.54 dose of cold, hard cash sent your way for each share you owned.

In 2012, that number grew to $0.61.

And now, you are getting a $0.66 quarterly dividend check for each share of Johnson & Johnson that you own. Your job going through life is to try and collect two to three dozen companies that fit the profile of Johnson & Johnson and allow you to, in Charlie Munger’s terms, drown in income over the course of your life.

The passage of time is the best friend of the excellent business. It has allowed Warren Buffett to establish a position in Coca-Cola 20+ years ago that grew from $1 billion to $18 billion. It has given him over eighty dividend checks along the way that have allowed him to make new and larger investments every single year. Owning an excellent asset is fun, because it gives you more and more cash to pursue your dreams and live the lifestyle that you desire as time passes. This is what gets me excited about long-term investing with dividend stocks. Every year, the rewards get larger.


Originally posted 2013-06-26 08:35:49.

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One thought on “Dividend Investing In The Context Of Your Life

  1. Monty says:

    Another great article. I'm a big Warren Buffett fan, but only hold one share of BRK.B. Have you read The Intelligent Investor where Graham says to not own a holding company, rather the stocks they hold? I wonder if BenjaminGraham would recommend Berkshire or just the stocks they hold? After reading that statement and thinking a bit I decided to do just that.

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