Chapter 12. Questions and Answers
Live the questions now. Perhaps then someday far in the future, you will gradually, without even noticing it, live your way into the answer.
Having published an investment newsletter in excess of four decades, we have received and answered hundreds of questions from subscribers, not to mention an equal if not greater number from attendees at investment workshops and speaking engagements. In addition, there are two previous books and countless commentaries in Investment Quality Trends and other publications that have addressed the dividend-value strategy in every way imaginable.
Be that as it may, it seems there is no such thing as too much information, as the title of this chapter would suggest. To our delight, the readers of Investment Quality Trends have demonstrated a talent for looking at investment problems from a very interesting angle. All of the following questions were posed by those readers.
Q: How can I tell when a dividend is in danger?
A: As my grandfather told me many times, "you can't draw water from an empty well." Dividends are paid out of earnings. When a company's dividend payment equals or exceeds its earnings, the well is dry and there is nothing left to operate and expand the company. A company can pay the dividend for a time out of cash flow or savings, but this is a temporary solution to what could be a serious financial problem. It is akin to putting a Band-Aid on a deep laceration before a doctor ...