One of the reasons to buy dividend companies is owning some of the best brands in the world. As consumers we trust a variety of brands and when you look around your home you will see them. Companies own the brands, spend millions of dollars ensuring as a consumer you buy their brand versus someone else and stock holders reap the benefit in terms of stock prices and dividend payments. Recently Tyson Foods bought Hillshire Brands to enhance their line up of foods, to gain greater supermarket exposure and to make more money for the company. Hillshire Farms has some national brands which over the years are part of the average consumer buying habits. Tyson Farms outbid another competitor and paid more than 30 times earnings and a 70% premium to what the stock was trading at before. This means the new valuation for great brands is 30 times and the stock price jumped 70% from before the takeover. There are other companies that have great brands which could sell for the same multiple if they were for sale. Jim Cramer on one of his Mad Money shows valued Kraft at close to $70 billion if the divisions were for sale – at the moment they are not for sale, but in the name of unlocking shareholder value people are looking, maybe even kicking the tires.

Linking to dividend paying stocks, one of the great strengths of dividend paying stocks is the brands that continually generate income for the company. If you own a consumer based company and other companies are paying 30 times the earnings, your company is automatically worth more and the stock price should rise to reflect the new reality of pricing. Since the brands are not for sale, the rise will likely be over  a period time and you can collect your dividends along the way. This is one of the reasons why over the long term dividend paying companies increase your wealth.

There are more questions than answers, till the next time – to raising questions