Scrutinizing the Aristocracy
There may be a noble class of stocks, but nobility and worthiness are not the same.
Oprichniki (repression of the Boyars), Nikolai Nevrev, 1870s, oil on canvas.
Are long track records of dividend payments a sign of performance or a marketing myth?
There’s no better way to sell a potential investor on an idea a catchy label. You may have heard about the “Nifty 50” of the late 1960s and their near calamitous performance during the 1970s. There have been dozens of these labels over the years. Jason Zweig’s commentary in The Intelligent Investor covers many of these and the absurdity they represent.
The ones that get exposed for their absurdity are often the ones that end disastrously. But some labels stick around for a long time, even when their performance is questionable at best.
There is one group of stocks that, in my opinion, hasn’t received much scrutiny. For legal purposes, I can’t use the given name. But it is a list of companies that have paid investors an increasing amount of cash consecutively for two and a half decades and, by title, are eligible to be a part of the British House of Lords.
It is a general consensus that a company able to maintain a streak of dividend payments is surely a good investment, but is it? Here are the three questions we want to answer today:
How have the individual companies of the current aristocracy performed over time?
Is buying this group of stocks and kicking back for the next 25 years a good idea?
Is it a good idea to buy an individual company simply because it is on this list?