No doubt about it – stocks that pay dividends vastly outperform those that don’t.
Check out this “dividend payer” performance chart from Ned Davis research. (Hat tip Dan Ferris from the 12% Letter for the link!)
Companies that pay a dividend outperform those that don’t – and all the better if they raise their dividend consistently as well.
While the late 90’s argument that companies should “reinvest the capital rather than pay it out” as en vogue for a bit, there has been little or no proof that this works in practice. It’s more likely that companies will engage in what Peter Lynch referred to as “Diworseification” – ie. a dumb acquisition.
How does this research make you feel, Barnes & Noble shareholders? Feel good about BKS holding back its dividend cash so that it – a brick and mortar company – can attempt to gun it out with the likes of Amazon and Apple on the digital battlefield?
Wall Street was not a fan of Barnes & Noble’s dividend cut – or plan of attack (Source: StockCharts.com)