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highly recommended |
The importance of dividends and the dangers of growth 
Jeremy Siegel has rediscovered the importance of dividends. When Charles Dow did his seminal research nearly a century ago he relied on dividends and ignored reported earnings because he knew that companies were lying on their balance sheets. Dividends, on the other hand, don't lie. Dividends let you compound. Very old fashioned.
The other important point this book makes is that investors almost always overpay for growth. He calls this the growth trap. It is critical for investors to distinguish between those companies whose innovations power the economy and those that provide superior returns to investors. They are usually two different things.
Many people seem to have learned nothing from the recent bursting of the NASDAQ bubble. Siegel has the research that shows what went so wrong several years ago and how to keep your head if it happens again.
The old is new again.
must read for all investors
Jeremy Siegel did it again with his new book. Filled with historical facts and observations, he shows how a company with 10% earnings growth is often a better investment that a company with 20% earnings growth. The reason for this phenomenon can be summed up in one word--valuation. Fast growing companies are expected to grow and that is taken into account in its price. Slower growing companies are expected to grow slow.
Professor Siegel shows how some of the best performing stocks in the past half century were companies with good dividends and earnings above expectations. He proves his point by comparing Standard Oil of New Jersey and IBM. IBM has grown faster than Standard Oil of New Jersey by any measure, except stock appreciation.
Professor Siegel also explains how fast growing sectors are not always good investments. Obviously, technology stocks in 1999 and 2000 were fast growing, but some of the worst investments you could have made. He also uses the Financial sector as an example. It has been one of the two fastest growing sectors in the past 50 years, but the stocks within the sector have not performed as well as the S & P 500. The reason this is possible is because new companies enter the business. These new companies bring competition and make the sector bigger, but not more profitable.
This book is great for any beginning investor or any professional.
taxes on dividends matter little
I am a bit amazed at the number of people who have given this book a bad review b/c Siegel supposedly doesn't address the fact that dividend disbursments are taxed -- he does!! He clearly states that they don't impact his portfolio returns much. If you do not believe him, run a simple simulation yourself where you compare a stock's return to that with dividends and without. The result? Not much of a change, actually. Taxes take about a 15-20% bite out of the FINAL value of the investment and their negative effect is simply ovwerwhelmed by getting so many shares on the cheap for so many years. This is the power of compounding in all its glory.
reviews: 1, 2, 3, 4, 5, 6, page 7, 8, 9
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based on 42 reviews
