Consistency and commitment

Two more rea­sons to love div­i­dends: con­sis­ten­cy & com­mit­ment. From a great blog you should read reg­u­lar­ly — the Reformed Broker:

Executives believe that main­tain­ing the div­i­dend is on par with invest­ment deci­sions such as cap­i­tal spend­ing, where­as they view buy­backs as some­thing to do with resid­ual cash flow after the com­pa­ny has made all invest­ments that are appro­pri­ate.

Meaning, once com­mit­ting to a div­i­dend lev­el (and increase strat­e­gy) it’s a con­sis­tent mul­ti-year deci­sion rather than re-ask­ing “how did the busi­ness do?” each and every year. Dividends are part of the plan.

Also impor­tant, is align­ing your own incen­tives to those of exec­u­tives. Why not align your think­ing to that of the exec­u­tives that run your com­pa­nies?