Rational investing for financial independence
Managements often mouth that paying a dividend is doing something for shareholders. It is precisely the opposite. Instead they are saying, “Sorry, we can’t do anything with it; see what you can do. Good luck!” –Briar Dividend investors often claim that a dividend rewards shareholders. It’s kind of of “money for nothing”. But most of these investors forget that a
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I have written numerous articles about dividends and compounding. To sum up, in order to create the biggest amount of wealth, you would want to invest in a company that has high returns on capital and opportunities to redeploy the earnings into the business at the same returns or close to same returns (I have provided relevant links at the
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Some months ago I wrote an article about the historical performance of so-called “sin-stocks”. Tobacco companies have performed the best in the US, and alcohol stocks in the UK. In this article I briefly argue for the reasons why and why they most likely continue to outperform. High margins and cashflows: Margins are very high. For example, 27% of the
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This article covers these topics: Why dividend investing is not necessarily the most efficient way to compound capital. Dividends are paid out of book value, but usually reinvested above book value. Why accept to receive a dividend at book value when you can for example sell shares at two times book value? Where is the best place for your capital?
Continue readingThis is a very short article based on two much longer articles: Don’t be fooled by your dividend bias – sell shares to create “income” Dividend investing: Don’t be fooled by your dividend bias – marginal rate of return/incremental return Don’t be fooled by your dividend bias: DRIP is inferior to internal compounding On the 30th of April 2020 Royal
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Let’s assume you buy Disney at 100 and one year later it trades at 130. A 30% return in one year, isn’t that great! Some time ago I used to cheer when my stocks rose to new highs. It felt great to count the paper profit but as a long-term investor this logic is irrational. Why? Because the only time
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