Published Sun, 14 Jun 2020 09:00:00 -0400 on Seeking Alpha
Dividends matter. They force management to be disciplined with your capital and it aligns interests with shareholders.
Not all dividend cuts are created equal. Some are the result of financial distress while others are the result of financial discipline.
Ignore the headlines and dig deeper. Some dividend cuts are beneficial to shareholders and present great opportunities.
We are big believers in dividend-paying stocks. This is one of the main reasons why we like REITs so much. They are legally obligated to pay at least 90% of their taxable income in dividends to shareholders.
Numerous studies have showed that REITs and other dividend-paying stocks outperform in the long run:
It makes good logical sense when you think about it:
It sends a signal: Paying a dividend is the ultimate sign of financial well-being. It means that the company has excess cash flow that it can throw shareholders and still be able to pursue its growth projects and meet its other obligations. It forces discipline in capital allocation: Because dividend-paying stocks retain a smaller portion of their cash flow, they must become more disciplined with how they use their liquidity. The executives are less likely to just waste the cash flow on a corporate jet than if it was retaining more cash. More scrutiny for growth projects: A company with little retained earnings is more likely to raise capital through equity markets, which adds another layer of scrutiny from analysts to approve growth projects. The focus is on accretive, high ROE growth. Other projects get poorly received by the market. Clear measurable targets: To achieve big things, we need to set clear targets. A set dividend amount is a good target that motivates executives, especially when their own bonus is on the line. Aligns interests: Giving control over the cash flow to the shareholders lowers conflicts of interest and pushes executives to think like owners. Put in simple terms, a dollar in the hand is... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|CBL & ASSOCIATES PROPERTIES||1.38||0.0||-0.95||0.35||27.34|
|BRIXMOR PROPERTY GROUP||19.68||16.5||1.19||1.12||5.68|
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