In 2017, the Long Island Iced Tea Company came up with a novel way to increase their share price. They came out with a new product? Hardly.
The company changed its name to Long Blockchain.
Laugh if you must but the shares jumped 200% at the open.
Under the old rules, a company had to make a new service or product that people actually wanted. Well, those days may be long gone. Nowadays, just hitch yourself to the latest fad and watch your shares take flight.
The Long Blockchain story says so much about the modern world of investing. In fact, I could work up a reasonable argument that the board of directors acted properly. They’re the custodians of the interests of shareholders, and what they did worked.
Is it their fault that the public behaves so imprudently? I don’t see why we should blame them for playing a game with such screwy rules.
This is why I have a high level of distrust in financial markets. The government lies to us. The media lies to us. And yes, businesses lie to us.
This mistrust is helpful for us with investing.
If you’ve studied accounting as I have, one of the most alarming lessons you learn is the wide latitude that companies have with reporting their earnings. By following the same set of rules, companies can report wildly differing numbers, and it’s all allowed.
This reminds me of the saying: what’s scary isn’t the illegal activity instead the scary part is what’s allowed.
This is what I like to focus on dividends. That’s one of the hardest numbers to monkey with. Companies can play around with earnings, cash flow, revenue—you name it. They can buy back shares and issue more shares. Sometimes at the same time.
But with dividends, the companies are parting with real cash. It’s something real.
Consider the stock of Colgate-Palmolive (CL).
Since 1977, shares of Colgate-Palmolivehave gained more than 64,000% (including dividends). If you had bought shares of Colgate-Palmolive 30 years ago, today the dividend would be paying you 53% per year on your original investment.
The hard part, of course, is waiting.
Before for investors with some patience, owning solid dividends stocks can be incredibly profitable. Bear in mind that Colgate-Palmolive has increases its dividend every year for the last 56 years in a row.
What I find especially interesting is that Colgate-Palmolive is hardly some revolutionary tech company. They weren’t created in a dorm room. They’re not involved with Bitcoin. Instead, they control 42% of the global toothpaste market.
That’s not a bad business to be in. Cavities, alas, will always be with us.
That’s not all. Colgate-Palmolive also makes mouthwash and dental floss. Did I mention cat food? They do that to.
My point is that a successful business doesn’t have to be one creating 12th dimension. Many great stocks are just regular businesses that do a few things, but they do them very, very well.
This is a very good time to consider adding Colgate-Palmolive to your portfolio. The earnings report is coming up soon.
First, some recent history. In April, Colgate-Palmolive reported Q1 profits of 67 cents per share. That beat Wall Street’s consensus by one penny per share. The stock popped 3.5% that day. Since then, the shares haven’t done much while the rest of the market has rallied.
The company is due to report Q2 earnings July 26. I think we’ll see more good news. The consensus of Wall Street analysts is that Colgate-Palmolive will report quarterly earnings of 72 cents per share. I think there’s a very good chance we’ll see another earnings beat.
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