MICHEL PIREU: Track record of rising dividends a good litmus test for investment decision

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MICHEL PIREU: Track record of rising dividends a good litmus test for investment decision 🔒

From September 1929 to June 1932 when the US stock market fell 81% on a real basis, real payouts fell only 11%In his book, The Future for Investors, Wharton Business School finance professor Jeremy Siegel gives investors concrete guidance about where to put their money if they are worried about a market downturn. Instead of relying solely on index funds, he suggests switching to companies with high dividend yields.

He then recommends reinvesting those dividends. Not only does that improve a portfolio’s long-term returns by buying in the downturns, it also reduces risk. First, because investors are more willing to hold on to regular cash-payers in the downturns, and second, because “dividends don’t lie”.

 

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