Div Tip #13: Think cash, not value

Dividend Tips

If you ask a CEO running a company which is more important; the value of the firm or the amount of cash it generates, you’ll invariably hear cash is king.  Value simply reflects a company’s ability to produce buckets of Benjamins.

Dividend Farming is concerned with the cash flow of the dividend stream.  The value of the underlying portfolio is of secondary interest as long as the dividends are being paid and continue to compound through DRIPs and dividend increases.  The more frequent the reinvestments and greater the div growth, the faster the cash flow increases.

 

What would you think as the owner of a business with earnings growing 5-10% year after year?  Consider how you would feel if those earnings were increasing at 15-20% per year?  You probably wouldn’t care about the value of the business if you’re earnings are growing at those rates.

Consider yourself a business owner.  Your goal is to build a portfolio of dividend stocks generating cash, then growing that stream consistently.  Value doesn’t pay the bills; cash does.  Think cash, not value.