I don’t know about you, but back in the 1990’s and into early 2000’s when I was investing I rarely looked at a dividend payment. Why would I? I was young and hitting it out of the park holding Cisco, C-Cube and other internet infrastructure stocks that would surge 3 percent a day. A paltry 2% dividend from older companies like AT&T simply did not appeal to my cowboy mentality.
Things have changed. Let’s just say that I’m more of a ‘homesteader’ now than a ‘cowboy’ and those 3% dividends that increase every year look pretty good when CDs pay less than 1%. In fact, one approach to valuation of a stock is the “Dividend Approach”. This approach simply states that the value of a common stock is the present value of all its expected cash dividends. So a stock would be worth all the dividends it would pay out over time discounted to today’s dollars. One must take into consideration the growth of the dividend stream with this approach. Now in fairness, I remember learning, while an MBA at William and Mary, that Modigliani and Miller developed a theory that showed dividends have no effect on a stock price.
Regardless, I know that reinvesting dividends is a great way to increase your holdings of a company over time at a lower average cost. This is because you will obtain more shares for your dividend payment when the price of the stock is low and less shares when the price is higher thus, automatically cost-average down. For a number of companies, you would have substantially more money by reinvesting dividends and holding the shares than simply spending the dividend. See Intel below:
RETURN ON $1,000 WITH AND WITHOUT DIVIDENDS FOR INTEL FROM 2004 TO 2011
Given the importance of dividends, I said to myself, “Self, we have some great data on dividends that we can expose for our audience”. Therefore, I am pleased to inform you that we have developed a very useful dividend history page to assist you in investment decisions. This helpful page presents the effective date of the dividend, the type of dividend the amount, the declaration date, the record date and the payment date. By having a nice little historical record, you can see the growth of dividends over time for a particular stock, which will assist you in analyzing the stock from a “Dividend Approach”. We have a few additional improvements that we will be rolling out on this page so check back once in a while.
Vice President and General Manager, NASDAQ.com