Thanks, Charlie. At least in the US, the chessboard today is much different than it was in the late 1990s. As I alluded to in the article, dividend-first policies were still deeply ingrained in board-level thinking as many board members of the era came up in markets where buybacks weren't popular at all. In other words, I don't think you'll see boards pivot to dividend-first policies in a recession, thereby committing greater amounts of cash flow at a time when cash on hand is more precious to them.
It's possible that shareholders shift their focus to cash returns in a downturn, which could influence the boards to turn back to dividends
Falling share prices would of course increase dividend yields on offer, but that also assumes those dividends are secure and well-covered going forward. There was a lot of yield chasing in 2008/2009 - "I'm locking in 8% yields!" - only to have the dividends get cut.
This is an insightful article that discusses the current market situation. However, it’s important to remember that a company's past performance does not guarantee its future success, particularly in a rapidly changing environment. Investors should regularly review their portfolios to ensure that each stock aligns with their objectives, and do so without letting emotions influence their decisions.
Great article Todd, very much agree - the focus should be on FCF, moat trends, reinvestment opportunities; not dividends per se.
That said I do wonder whether dividend investing might make a comeback if and when the AI bubble bursts, just like after the the TMT bubble burst.
Any thoughts?
Cheers,
Charlie
Thanks, Charlie. At least in the US, the chessboard today is much different than it was in the late 1990s. As I alluded to in the article, dividend-first policies were still deeply ingrained in board-level thinking as many board members of the era came up in markets where buybacks weren't popular at all. In other words, I don't think you'll see boards pivot to dividend-first policies in a recession, thereby committing greater amounts of cash flow at a time when cash on hand is more precious to them.
It's possible that shareholders shift their focus to cash returns in a downturn, which could influence the boards to turn back to dividends
Falling share prices would of course increase dividend yields on offer, but that also assumes those dividends are secure and well-covered going forward. There was a lot of yield chasing in 2008/2009 - "I'm locking in 8% yields!" - only to have the dividends get cut.
Todd
Thought provoking. Impacts for all of us but especially for those who rely on dividends as part of retirement.
Lot of good points, one counterpoint- dividend investing can work pretty well in certain sectors- financials, utilities, …
Now is the time to be buying yield when no one wants it….couldn’t disagree more.
This is an insightful article that discusses the current market situation. However, it’s important to remember that a company's past performance does not guarantee its future success, particularly in a rapidly changing environment. Investors should regularly review their portfolios to ensure that each stock aligns with their objectives, and do so without letting emotions influence their decisions.