Companies that consistently pay dividends tend to be stable and profitable from "summary" of The Little Book of Big Dividends by Charles B. Carlson
One of the most common misconceptions about dividends is that they are only for income-seeking investors. While it is true that dividends provide a steady stream of income, they also serve as a powerful indicator of a company's stability and profitability. Companies that consistently pay dividends tend to have strong financial foundations and solid growth prospects. The act of paying dividends requires a company to have a reliable and consistent cash flow. This means that the company is generating enough profits to not only cover its operating expenses but also to distribute a portion of its earnings to shareholders. Companies that pay dividends are therefore more likely to be financially healthy and well-managed. Furthermore, companies that have a history of paying dividends are often more stable in terms of stock price performance. Dividend-paying stocks tend to exhibit less volatility compared to non-dividend-paying stocks, providing investors with a smoother ride during market fluctuations. This stability can be attributed to the fact that companies with a commitment to paying dividends are generally more mature and established in their respective industries. In addition to stability, dividend-paying companies tend to be more profitable in the long run. The act of consistently paying dividends signals to investors that the company is confident in its ability to sustain growth and generate returns. As a result, dividend-paying stocks have historically outperformed non-dividend-paying stocks over the long term, providing investors with both income and capital appreciation.- The concept that companies that consistently pay dividends tend to be stable and profitable is grounded in the fundamental principles of sound investing. By focusing on companies with a track record of dividend payments, investors can identify businesses that are well-positioned for long-term success. Dividends not only provide income but also serve as a valuable indicator of a company's financial health and growth potential.
