One of the advantages of holding a stock for a long time and reinvesting the dividends into the same company that paid out the dividends is that you become very receptive to the idea of falling stock prices. In fact, sometimes I think that only affluent or aspiring affluent private investors that are reinvesting the dividends are the only ones who truly appreciate how falling dividends can aid the income production process.
I want to use GlaxoSmithKline as an example because they are in the news today. The management has a long history of being honest and candid with investors, and actually, they usually get punished for it (that’s why it’s hard for me to get mad at management teams that speak in corporate jargon and describe all bad news as one-time events, because when investors actually hear negative news from corporative executives, they pout and lower the price of … Read the rest of this article!