Some thoughts of mine on Dividends

Stock market participants get very excited about dividends especially retirees who may depend on the regular influx. I mean, a 6% dividend yield is very attractive especially considering term deposit rates at the moment. However, something I've always considered is small cap stocks who may pay 0.5%. Out of curiosity, i sometimes check what stocks were trading at maybe 10-20 years ago and compare that price paid to an investor who bought in then, to the dividend yield now. Let's take CSL as an example. Picking some random point not near the trough, the stock was trading at around $8. Even though it has risen substantially previously, it's now trading at about $70 and paying a DPS of about $1.10 implying a 13.75% dividend yield. That's not adding on all the capital appreciation, dividends reinvested or anything like that. Right now, if you bought the stock at that time for that price, you'd be making 13.75% p.a. Which i don't think is very bad at all. And i tell you what, if you're fortunate to be in a position to have done what i used as an example above and earning 13.75% as a yield, i promise you'd be outperforming many funds (10 yr avg) if you netted out the costs.

And what can be attributed to a yield such as this one? A high quality business is the simple answer in my opinion. Thus, i believe it's fundamentally crucial to seek superior businesses.

So while some businesses are paying 6% at the moment,someone who bought into a small yield stock years before, might have a substantially higher dividend yield than most of the stocks at the moment.

While not related to dividends,an even better example might be Berkshire Hathaway. Many investors who saw the stock rise from $1,000 to $10,000 said "it's Warren Buffett, but still, I've missed out." I believe the 3 most dangerous words  in investing are "I've missed out". This is a dangerous following. Contrastingly, i believe the 3 most important words in investing are "margin of safety". This phrase is so useful to me, I even apply it to many of my life decisions.