Dividends and How We Got to Now

Part of investing is looking forward, we want to ensure our investments will continue to be profitable and pay dividends, we also want the company to stay in business and grow. If the company has a natural monopoly, it makes it easier, if not then we occasionally we need to look at how things fit in and if we believe the company is doing the correct thing. There is a book called How We Got to Now – 6 Innovations that made the Modern World by Steven Johnson, published by Penguin, NY, 2014. Mr. Johnson has written other books which you may want to check out.

If you look at our society and there are many wonders, how did or what needed to happen to arrive at where we are? In Mr. Johnson’s book the 6 important ingredients are glass, cold, sound, clean, time and light. You might add a category, but it is differently an interesting way to see how the world we know evolved to where it is. If you can see what Mr. Johnson sees, that will help you invest and notice if the companies you invest in do not seem to be getting in, how to connect the dots for the future.

The book is about an innovation or cluster of innovations, in one field ends up triggering changes that seem to belong to a different domain together. In Mr. Johnson’s book, he does not discuss the value if the change is for the better, but how did the change come about in the first place? If we can understand innovation, we can make better predictions, if you can make better predictions, you can invest in growth stocks and increase your wealth or try to determine what you should avoid which will save you money.

Linking to dividend paying stocks, we use the past to indicate if the companies can and still earn profits and pay the dividend. It is a very useful thing to do, however every year the competitive environment becomes tougher and you need to know if the companies you put money into are up to it? Growth stocks are often about ideas that could be, dividend ideas are about proven ideas the market has embraced. There are always alternatives being conjured up to gain a piece of the profitable companies, you need to know is how to determine if you should seek alternatives or maintain where your positions for a longer period of time and one of the methods is ask how does your company make money?

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

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