Dividend Stocks Become the Heroes

So read a Wall Street Journal headline yesterday – the former dogs are now the darlings. (Jonathan Craig, “Dividend Stocks Become the Heroes,” Wall Street Journal, Dec. 19, 2011, p. C1.) Well, the Barometer had a little book a few years back (co-authored with the late and great strategy professor, Louis Grossman) called: Building a Business Through Good Times and Bad: The Stories of Fifteen Companies, Each with a Century of Dividends. The book did an in-depth look at how these companies were able to come up with the cash, consistently, to pay their shareholders.
Oh, the mockery that ensued with the release of that book (about the time of the dot-com bubble), “Why would I care about being paid a dividend if the stock is increasing in value?” “A dividend is not a measure of performance!” The book ended up at about 1,768,819 on Amazon’s bestseller list. No one was interested.

Professor Grossman and I saw something compelling in the dividend companies. You cannot lie about dividends. You can either pay them or you can’t. Those who were relying on share value were proudly boasting of returns that were only as good as the trustworthiness of the management team putting the numbers together. Cash doesn’t lie; you either have it to pay the dividend or you don’t. Now that we have been through several cycles of mark-to-market accounting and spinning off debt and every imaginable way to get around FASB rules, shareholders are clear on the principle of cash. If the company is paying you, then there are real, live cash earnings. And there is an added bonus to dividends, as it were, the more cash execs dole out to shareholders, the less there is for them to pocket as bonuses. Regular dividends impose discipline on companies because they must face the reality of cash generation.

The so-called “dogs” of the stock market, the shares of companies that pay dividends, are the new go-to investments. Share prices on high-dividend payers exceed those of lower-paying companies by 17%. Get the cash, get the cash, get the cash – the market finally returns to its roots. Oh, that Professor Grossman were here to see it.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
This entry was posted in News and Events. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.