Get Rich with Dividends: A Proven System for Earning Double-Digit Returns

One Lump or Two?

Wall Street analysts have their own language. They say things like “Can you give some more granularity on that?” when they’re asking a CEO for more details on a topic, or they might ask for more “color” on the quarter.

One of my favorite terms is “lumpy.” It means inconsistent. A company’s profits might be described as lumpy if one quarter has earnings of $1 per share, the next has only $0.20 in earnings, and the following quarter EPS is $1.05. Sometimes that’s due to a sales cycle or simply when a big contract gets signed/paid/recognized.

I’ve extended “lumpiness” to dividend payments as well. Foreign stocks often have lumpy dividends. They might pay $1.65 per share in year 1, $1.32 in year 2, $1.77 in year 3 and $1.41 in year 4.

American companies typically try not to have the dividend flying all over the place like that. They do their best to keep the dividend consistent. If management is concerned that it might have to cut the dividend in the future, chances are it won’t raise the dividend the year before, so that the change doesn’t appear to be a reduction in the dividend.

When it comes to companies located overseas, particularly in emerging markets, the dividends can vary widely from year to year. Currency fluctuation can play a big part in that. In the local currency, a company may pay a consistent dividend. But if that currency moves 10% per year against the dollar, an investor in the American depositary receipt (ADR) may get $2 per share in dividends one ...