Dividends Still Don't Lie: The Truth About Investing in Blue Chip Stocks and Winning in the Stock Market

Chapter 4. Quality and Blue Chip Stocks

The sweetness of low price is soon forgotten; but the bitterness of poor quality is long remembered.

—Anonymous

A value-based approach to investing such as the dividend-value strategy is a powerful arrow to have in your investment quiver. When properly implemented through high-quality companies that represent historically good value, an investor is well-armed to out-duel the competition.

The terms quality and value are repeated frequently throughout this book because they are the twin pillars on which the foundation of the dividend-value strategy rests. In previous chapters we have discussed the importance of value in a generic way; in later chapters the discussion will become much more specific.

Before we get into the finer aspects of value identification, however, it is important to introduce and understand the concept of quality and its underlying importance. As stated previously, the dividend-value strategy can be implemented with any company that has paid dividends long enough to establish a repetitive pattern. For optimum investment results, however, it is best implemented through high-quality, blue chip stocks.

More than 40 years of research shows that the dividend-value strategy, when implemented through high-quality stocks with long track records of excellence and performance, provides a powerful tool for building wealth. At the end of the day, it is the building of wealth, both of capital and income, to meet the present and future cash ...