The 7 critical items to read first in an annual report in 20 minutes (Part 8 of 9)

This is a series of articles describing how to quickly understand the key aspects of the annual report from a company that you have invested in with your hard earned money. This series started with an overview post on November 30, 2010.

7. Dividends

I typically do not like dividends. There are truly bad companies on the market that use dividends to keep their stock holders satisfied rather than using that money to grow the company and create long-term growth. Also, I buy a stock when its price is growing and sell it when the market is moving against the stock; therefore, I may miss a dividend payout in order to preserve my capital during a market correction. When you become addicted to dividends, you lose the perspective that the company may not be performing adequately or you may be tempted to stay with a stock during a price correction that ultimately erodes your investment cash.

I personally prefer that the company keep its dividend to a minimum and use its cash to grow the company faster. This will cause the stock price to appreciate in the long term. Your investment strategy may be different though.

Even though I don’t make my decisions based on dividends, it is important to understand what the company is doing regarding dividends. The annual report is the communication vehicle for the management of the company to tell you, the owner, how much you will be receiving for your dividend check.

You need to be comfortable with this payout. Is it adequate? Is it hurting the other investments the company could be making? Is it increasing enough to fit your goals?

Here are the links to all 9 posts of the series:

  1. The 7 critical items to read first in an annual report in 20 minutes (Part 1 of 9)
  2. The 7 critical items to read first in an annual report in 20 minutes (Part 2 of 9)
  3. The 7 critical items to read first in an annual report in 20 minutes (Part 3 of 9)
  4. The 7 critical items to read first in an annual report in 20 minutes (Part 4 of 9)
  5. The 7 critical items to read first in an annual report in 20 minutes (Part 5 of 9)
  6. The 7 critical items to read first in an annual report in 20 minutes (Part 6 of 9)
  7. The 7 critical items to read first in an annual report in 20 minutes (Part 7 of 9)
  8. The 7 critical items to read first in an annual report in 20 minutes (Part 8 of 9)
  9. The 7 critical items to read first in an annual report in 20 minutes (Part 9 of 9)

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