Why Dividends Don't Lie

In past editions of My Daily Oracle, we looked at how Geraldine Weiss outperformed by using dividend yields to determine when to buy and sell shares.

There is no doubting her success, but why did she settle on dividends instead of other factors? To put it frankly, Weiss didn't trust the Chief Financial Officers of the world's publicly traded companies.

Dividends are the most reliable measures of value in the stock market. Earnings are figures on a balance sheet that can be manipulated for income tax purposes. Earnings can be the product of a clever account’s imagination. Dividends, however, are real money. There can be no subterfuge about a cash dividend.
— Geraldine Weiss

Once paid, dividends can’t be recalled or disguised. That’s why dividend history is such a powerful signal: it shows which companies are truly profitable and committed to rewarding shareholders.

Weiss and her successor Kelley Wright emphasize focusing on blue chips: established, financially strong firms with long records of steady dividends and solid balance sheets. These companies may not grab headlines, but their payouts can provide both income and a reliable compass for value.

The dividend-yield approach to value in the stock market can be applied to any dividend-paying stock. However, it is most successful when it is applied to high quality, blue chip stocks.
— Geraldine Weiss

To learn more, read one of Geraldine Weiss's books. You can still get her original Dividends Don't Lie in print if you're lucky, but you're probably better off with the more recent update by her successor. The Weiss quotes in today's newsletter are pulled from her introduction to the latter volume, called Dividends Still Don't Lie: The Truth About Investing in Blue Chip Stocks and Winning in the Stock Market by Kelley Wright.

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