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Dividends as Your Personal Stimulus Package
by David Van Knapp, author of
SENSIBLE STOCK INVESTING:
How to Pick, Value, and Manage Stocks
and
THE TOP 40 DIVIDEND STOCKS FOR 2010:
How to Generate Wealth or Income from Dividend Stocks
November, 2008
As most of you know, the United States government has entered a sort of
bailout/stimulus mania phase in its efforts to save the economy.
Among other actions, the U.S. has spent or allocated $29 Billion to bail out Bear
Stearns (financing its purchase by JPMorgan Chase); $85 Billion for AIG; and
$700 Billion in a massive bank support program. In September, the U.S.
government seized control of the mortgage giants Fannie Mae and Freddie Mac,
assuming the liabilities of more than $5 trillion worth of mortgages. The ultimate
cost of the Fannie/Freddie takeover is unknown, but will undoubtedly reach
many billions of dollars.
These are boxcar numbers, all directed toward helping or saving large
corporations. All of the money, of course, comes (eventually) from U.S.
taxpayers.
Many citizens have complained that more help should be directed to individuals.
And in fact, along with bailouts of the big boys, one direct-to-citizens stimulus
package has been implemented, and another is being discussed. The first one,
the Economic Stimulus Act of 2008, provided $158 billion in tax refunds to the
American public, typically in the form of $600 checks to individuals and $1200
to families.
A second stimulus package being discussed would again provide American
consumers with cash that could be saved, invested, or spent. Cost estimates for
the second stimulus program have ranged up to $300 Billion.
I was struck by the dollar values of these various programs. The reason I was
struck is that they are on the same order of magnitude as the amount of money
distributed directly to shareholders by American corportions in the form of
dividends each year.
As I have written before, dividends are capitalism's quiet way of getting cash to
individuals. Companies make profits and distribute some of those profits directly
to their owners.
In 2008, according to the latest S&P estimate, companies in the S&P 500 will
distribute almost $245 Billion in dividends to their shareholders. Add in the
companies that are not in the S&P 500, and the total might reach $275 Billion.
Unlike government stimulus programs, these are not singular events. They don't
require congressional action or presidential approval. Companies have been
doing it for many years.
Last year, S&P 500 companies distributed $247 Billion. The year before that,
$225 Billion. From 1995 through the end of 2008, over $2.2 Trillion will have
been distributed by companies in the S&P 500 to their shareholders.
This stimulus is available to anyone. Want to create your own stimulus check?
Buy a good dividend-paying stock and hang onto it. Every month or quarter,
that company will send money to you.
by David Van Knapp, author of
SENSIBLE STOCK INVESTING:
How to Pick, Value, and Manage Stocks
and
THE TOP 40 DIVIDEND STOCKS FOR 2010:
How to Generate Wealth or Income from Dividend Stocks
November, 2008
As most of you know, the United States government has entered a sort of
bailout/stimulus mania phase in its efforts to save the economy.
Among other actions, the U.S. has spent or allocated $29 Billion to bail out Bear
Stearns (financing its purchase by JPMorgan Chase); $85 Billion for AIG; and
$700 Billion in a massive bank support program. In September, the U.S.
government seized control of the mortgage giants Fannie Mae and Freddie Mac,
assuming the liabilities of more than $5 trillion worth of mortgages. The ultimate
cost of the Fannie/Freddie takeover is unknown, but will undoubtedly reach
many billions of dollars.
These are boxcar numbers, all directed toward helping or saving large
corporations. All of the money, of course, comes (eventually) from U.S.
taxpayers.
Many citizens have complained that more help should be directed to individuals.
And in fact, along with bailouts of the big boys, one direct-to-citizens stimulus
package has been implemented, and another is being discussed. The first one,
the Economic Stimulus Act of 2008, provided $158 billion in tax refunds to the
American public, typically in the form of $600 checks to individuals and $1200
to families.
A second stimulus package being discussed would again provide American
consumers with cash that could be saved, invested, or spent. Cost estimates for
the second stimulus program have ranged up to $300 Billion.
I was struck by the dollar values of these various programs. The reason I was
struck is that they are on the same order of magnitude as the amount of money
distributed directly to shareholders by American corportions in the form of
dividends each year.
As I have written before, dividends are capitalism's quiet way of getting cash to
individuals. Companies make profits and distribute some of those profits directly
to their owners.
In 2008, according to the latest S&P estimate, companies in the S&P 500 will
distribute almost $245 Billion in dividends to their shareholders. Add in the
companies that are not in the S&P 500, and the total might reach $275 Billion.
Unlike government stimulus programs, these are not singular events. They don't
require congressional action or presidential approval. Companies have been
doing it for many years.
Last year, S&P 500 companies distributed $247 Billion. The year before that,
$225 Billion. From 1995 through the end of 2008, over $2.2 Trillion will have
been distributed by companies in the S&P 500 to their shareholders.
This stimulus is available to anyone. Want to create your own stimulus check?
Buy a good dividend-paying stock and hang onto it. Every month or quarter,
that company will send money to you.
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