Why being a Dividend Growth Investor is like being a Mob Boss
The Dividend Growth Investor is the Mob Boss of the Investment world
So I had this analogy come to me the other day and I was surprised by how many similarities there are. Obviously, as Dividend Growth Investors are not having anyone whacked – in the traditional sense – but bear with me here as I explain in more detail.
What types of Inventors are there? If I am going to stereotype DGI I may as well have some fun and stereotype other investment styles as well.
Value Investors – The Accountants of the Investing world – meticulous when it comes to numbers and reason.
Growth Investors – The Athletes of the Investing world – Not looking for bunt singles here – they are looking only for home runs.
Momentum Investors – The followers of the Investing world – looking at what the cool kids are doing and following along.
Conservative Investors – Always the last ones in the pool. Strategy focuses on not losing money
ETF/Index Investors – Bogleheads are the proud couch potatoes of the investment world – any why not? If you aren’t interested in investing this is probably the way you should invest.
But Dividend Growth Investors? They are the Mob Bosses of the Investing world.
Companies that are publicly listed want you to buy them. In fact, it is imperative number one that they get as many people as possible to become investors in their company. Every quarter these publicly listed companies come out and give a complete accounting of their business – by law. You hear all sorts of metrics that the company’s management talks about on the earnings call – Profits, EPS, RoE, Growth, Debt, Liquidity, Equity and forecasts in future growth. All of these things are important, of course. However – what ‘s really important at the end of the day is how much cash a business generates and the DGI? Well we want our share.
During the earnings call I imagine thousands of Dividend Growth Investors saying out loud things like:
- ‘Where’s my money’?
- ‘You had a good quarter and your RoE is record high? good for you – PAY ME.’
- ‘You are forecasting a high single digit EPS growth rate over the next five years? Glad to hear it – NOW PAY ME’
- ‘Your internal costs controls have yielded stronger than expected impacts to the cost structure of the business? fantastic – GIVE ME MY MONEY’
- ‘Competitive pressures are impacting your bottom line? You better fix that – in the mean time – GIVE ME MY MONEY’
- ‘You have given me $1 a share dividend for four quarters in a row – NOW I DEMAND A RAISE’
Always get Paid
We are the Mob Bosses of the investment world. We want to get paid no matter what and the highly paid management better be on board with treating the shareholder like the owner that she is. There is a lot of dispute about the value of dividends – which I largely view with amusement – but the laser like focus that a dividend growth policy has on management is truly one of the best tenants a management team can be given. When cash generation is the focus of management, shareholders win. Ultimately, shareholders are who needs to win for the health of the enterprise.
People who are interested in being a self directed investor may want to consider the Dividend Growth Investment strategy – if it fits your personality.
If you do decide to pursue investing in that manner – then I would encourage you to behave like a Mob boss when it comes to getting paid.