Category Archives: dividends

Dow Altimeter Review

The Dow Altimeter, as constructed by Edson Gould, is based on dividend payments made by the constituents of the Dow Jones Industrial Average (DJIA) as reported in the Barron’s section titled “Indexes PEs and Yields.”  The Dow Altimeter information provides a graphical representation of fundamental data.

On January 23, 2018, we said the following:

“While the market appears destine for higher ground, it is worth noting that the 24,223 level is the new support level for the DJIA.  If the DJIA fails the support level at 24,223 then the next stop is the 18,373 level.”

Below we have updated the Dow Altimeter and included the coincidence of buy indications based on the dividend history of the Dow.  We believe this history of dividend payments provides strong evidence of when a bear market has come to an end along with a fair estimate of when a recession should come to an end.

A recession and a bear market is coming.  We don’t know when, however, we can prepare ourselves with the necessary insight to better call the bottom (better than our July 2009 call for the stock market, our August 2009 call for the end to the recession and our December 2010 call for the bottom in real estate.

National Dairy Products: 1927-1937

The chart below highlights two issues:

1) How long did it take for a stock to get to breakeven?

In the case of National Dairy Products, the stock did not get to breakeven by the 1937 peak. National Dairy declined approximately -90% in price from 1929 to 1933.  From late 1933, National Dairy rose as much as +180% to the 1936 peak. 

2) What happened to the dividend during the stock market crash and "Great" Depression?

In spite of the market decline from the 1929 peak, National Dairy’s earnings continued higher by the end of 1930.  Once earnings started to slide in 1931, the pace of dividends continued to move higher.  In 1932, it became apparent to management that the dividend policy had to be reduced.  The pace of the decline in dividends tracked closely the decline in earnings.  However, when earnings started to increase, the dividend was not pushed higher until two years after the trend reversed in earnings.

The change in dividend policy is a great example of management’s expectation of future prospects.  However, when a policy of cutting the dividend started, in 1932, most dividend investors were probably becoming fearful of the prospects going forward and reacted by selling their stock.  In reality, 1932-1933 was the time to start accumulating shares of the stock.


Borden: 1927-1937

The chart below highlights two issues:

1) How long did it take for a stock to get to breakeven?

In the case of Borden, the stock did not recover to the 1929 peak of $92 by the end of 1937. In fact, by 1954, Borden got as high as $74. Borden was later acquired in a KKR deal struck in September 1994. Buyers of Borden in 1934 did very well, however, recovery was only achieved in due time through the virtue of total return.

2) What happened to the dividend during the stock market crash and "Great" Depression?

The dividend was increased or maintained in 1929, 1930, and 1931. However, in the year of the stock market bottom, Borden pursued a dividend cutting campaign. In 1932 the full year dividend was $2.27. By 1939, the dividend was $1.27. In this case, the dividend cut ended at $1.27 which preceded the final decline in earnings. Earnings finally ascended in 1935. By 1954, the full year dividend was $2.64 This increase in earnings was later reflected in the growth of the dividend.

370503 Borden

It’s All About the Dividends

A reader pointed out the high quality charts that are found at  One chart that is of interest is the inflation adjusted value of the Dow Jones Industrial Average from 1921-1948, 1948-1982 and 1982-present (found here).


We’re always curious about the display of charts that more accurately reflect the performance of the stock market.  After all, when discussing the merits of investing, people should know the real and nominal rates of return that are most realistic and probable for planning purposes.  What stands out about these three different periods is the magnitude of increase and decline over a given stock market cycle.

In the period from 1921 to 1948, the extent of the stock market increase, when adjusted for inflation, was approximately +469% before the long decline to the 1932 or 1942 low. In the period from 1948 to 1982, the inflation adjusted market only increased +320% and covered a period of nearly 33 years.  Finally, in the period from 1982 to January 2014, the stock market has risen nearly +731% covering a period of 31 years.

However, while the inflation-adjusted value of the Dow Jones Industrial Average reflects information that investors seldom see, it pales in comparison to what most professionals never get a glimpse of.  We’re talking about the Dow Jones Industrial Average adjusted for inflation including reinvestment of dividends along with the growth rate of dividends. Below are the same three periods with the adjustment for inflation and reinvestment of dividends plus the growth rate of the dividends.


All three periods include the adjustment for inflation and dividends (and dividend growth).  This concept of adjusting the Dow Jones Industrial Average for inflation and dividends was covered in a March 2, 2012 Wall Street Journal article titled “Dow 1,339,410: The Latest Milestone (found here)”.  At the time, the author of the  article quoted Meir Statman, a Santa Clara University professor, on his work on the topic of adjusting DJIA for inflation, dividends and taxes.  A more detailed review of this topic was outlined in the Winter 2000 Journal of Portfolio Management article by Meir Statman and Roger Clarke titled “The DJIA Crossed 652,230 in 1998 (PDF found here)”.

The conclusion about investing in stocks should be clear, dividends matter.  Unfortunately, the impact of dividends is not automatically reflected in any stock charts that we’ve had access to.  This results in a profound misunderstanding of the benefits of dividends, making it easy to ignore the impact.  All of the stocks found in our U.S. and Canadian Dividend Watch Lists (found here) attempt to draw investor attention to what matters most, dividends for the purposes of compounding.


  • Value Line Investment Survey. “A Long Term Perspective: 1920-2005”. 2006.
  • Meir Statman and Roger Clarke. "“The DJIA Crossed 652,230 in 1998”. Journal of Portfolio Management. Winter 2000.

Transaction Alert

On February 11, 2014, we carried out the following transaction(s):

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