Ever think about giving up on a stock because some analyst says it’s not growing?
Financial information only tells half the story. It may say that the price is flat, it may say that dividends have not grown. But that is not particularly a reason to avoid or abandon it. Let’s look at why.
Looking at it all
It’s no secret that a growing company with a growing dividend is a good thing for dividend investors. As shareholders, we benefit from that growth. With increasing income comes growth in our financial condition.
So it is often the case that some investors are quick to abandon companies that do not exhibit these growth factors. A slowdown to them is like an ‘abandon ship’ signal,
Trees don’t grow to the sky
Not very company can be a hot growth company all the time. The fact is most all companies go through slowdowns from time to time.
Who Are We
In my view, it is speculators, not investors, who make the quick-change switches when there is any sign of less than stellar growth. Namely, the mindset of people who buy and sell immediately after any change in company news are not investors. Investors are looking at the long-term aspects of a company’s financial condition.
Who Am I
My quest for a comfortable way to invest brought me to dividend investing. So you may ask: what’s so comfortable about dividend investing?
Comfort
I wanted a method to invest for the long term. A way to invest that did not require constant attention to economic news. A way to invest that allowed me to sleep at night without worry. A way to not have to care about the day-to-day news. A way that I could ignore everything for as long as I wanted, and could take a look at my financial net worth when and if the mood struck, even if only once a quarter.
Perhaps my description of the preferred type of investing seems unhinged. Of course, you may say, investing is risk. No risk, no reward you might say. And all of this is true, I say. But there are different kinds of investing just as there are different types of risk.
Dividend investing is so much less volatile than stock prices. That alone tells me just about everything I needed to know about investing.
Certainly, I would not be able to tell you that dividend investing is risk free, because it is not risk free. But it is a muted kind of risk.
Lowered Expectations
But back to the original question. What to do when growth stalls. In most all cases, I let my dividends just continue. Since I (feel I) am well diversified, at least in the subset of the investment world where I am comfortable, while some companies slow, others grow. Commerce continues, and which company will grow and which will stumble is unknown until it happens. And a company which has slowed is often later a company which later expands.
One benefit of sticking with a slowed company is my dividends buy more and more shares at lower prices during this phase. Later, should its business pick up, I am now is possession of more shares than I would have been should it never have slowed. That’s usually a risk I feel is well worth taking.
What do you do when growth slows? Let me know here.
Illustrated is the cover art of My Lady Nicotine (1896 version). It is a novel by J. M. Barrie about his quest to quit smoking. (He later wrote Peter Pan.) Courtesy Internet Archive.
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