- I Hate Dividends.. wrote Andy Kessler.

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I Hate Dividends.. wrote Andy Kessler.

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I Hate Dividends.. wrote Andy Kessler.

Thursday, 12 July 2007

I avoid companies that pay dividends like the plague," wrote Andy Kessler.
Kessler used to be hedge fund manager in Silicon Valley... trading technology stocks during the boom.
When the bust came, Kessler wrote a book about his experiences.
The book became a bestseller. Since then, Kessler has written three more books and dozens of stories for big newspapers.

When [companies] pay dividends, they are admitting they have nothing better to do with their money," Kessler wrote. "If they won't invest in themselves, why should I?
"Dividends entice investors into debt-laden, slow- or no-growth companies, more likely to cut their dividend, burning investors worse than conflicted research analysts. Run away. They are wearing a scarlet dollar sign. You want yield? Buy a bond.

"Dividends don't create economic growth. Failing companies just bribe investors with dividends. Encourage companies with a future to invest in their operations, seeking high returns. If all that mattered were dividends, we would still be investing in railroad stocks."

It's ironic Kessler mentions the railroads. Investors have ignored railroad stocks since the 1960s. Commercial airlines took all their passengers, and truckers stole their freight market. Kessler's right about that.

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Expectation is the reason. Hot new stocks – like Kessler's technology darlings – have such high expectations built into their share prices, they offer hardly any upside to investors. Their volatility often causes gut-wrenching losses. Exxon Mobil, BNSF, and Altria (Philip Morris) – on the other hand – are among the best-performing stocks in history. Yet investors have always considered them old economy fuddy-duddies with no growth prospects.

Happy Investing
Source Daily Wealth

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