Handling volatility with long-term dividends
Wall Street Breakfast
Seeking Alpha
4.1 • 1K Ratings
🗓️ 7 December 2024
⏱️ 3 minutes
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| 0:00.0 | Eli from Dividendology. Welcome to Seeking Alpha's podcast. It's great to have you. Thanks for joining us. |
| 0:17.0 | What stocks are you most focused on? What would you say your top stocks that you're focused on |
| 0:22.9 | these days? Obviously, we want to start with looking for quality companies that can grow their free |
| 0:27.3 | cash flow. And I would actually make the argument that the highest quality businesses in the |
| 0:32.2 | entire world all pay out dividends. Think of companies like Microsoft or Visa, and now we can |
| 0:37.3 | even throw companies like |
| 0:38.3 | meta and like Google into that conversation. These are companies that generate really high levels |
| 0:44.2 | of return on invested capital. They have high free cash flow growth rates. And so typically when you |
| 0:48.6 | hear those things, you think, well, wouldn't it paying out dividends prohibit their ability to grow? |
| 0:53.2 | Wouldn't they just be better off reinvesting that capital back into the business? |
| 0:57.2 | But here's what you have to understand. |
| 0:58.9 | These companies have massive cash positions on their balance sheet. |
| 1:02.2 | They are drowning in cash. |
| 1:03.6 | And in fact, they generate so much cash, they can't intelligently reinvest it all back into the business. |
| 1:08.5 | And a good example of this, again, is going to be meta. |
| 1:15.0 | They just burned 50 billion with no return on that 50 billion by investing into the metaverse. They would have been much better off actually paying that out as a dividend. |
| 1:19.2 | And I think the management team has realized that because obviously like we've seen over the |
| 1:22.4 | past year, they're now paying out a dividend. So we're not sacrificing growth for these dividend payments |
| 1:28.5 | that we're receiving them. We're actually receiving them because these companies are such quality |
| 1:32.3 | companies. They're generating so much cash that I can receive growing dividend income year over |
| 1:36.7 | year. So I would say one of the main companies I've been really building up over the past year is |
| 1:40.1 | a visa. It's going to have a low starting dividend yield, so it depends on what your goals are. If you're someone closer to retirement or someone closer to living off dividends, maybe that's not |
... |
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