10

Sources of Shareholder Value

Earnings and Dividends

The importance of dividends for providing wealth to investors is self-evident. Dividends not only dwarf inflation, growth, and changing valuations levels individually, but they also dwarf the combined importance of inflation, growth, and changing valuation levels.

—ROBERT ARNOTT, 20031

It is just after 4 p.m. eastern time, and the major U.S. stock exchanges have just closed. The anchorperson of one of the major financial networks excitedly proclaims: “Intel just out with its earnings! It ‘beat the Street’ by 20 cents, and its price has jumped $2 in after-hours trading.”

Earnings drive stock prices, and their announcements are eagerly awaited by Wall Street. But exactly how should we calculate ...

Get Stocks for the Long Run 5/E: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies, 5th Edition now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.