Where’s my dividend? It’s a common complaint. You bought that stock because you liked the dividend forecast and thought that would be nice to get for your retirement nest egg. Now the postman has come and gone and there is no dividend check – again! Dividend payment risk is one of a host of subjective financial investment risks that can add up to a total investment loss. Trusts and royalty business constructs like royalty income partnerships and Delaware Statutory Trusts have to distribute the cash flow as they receive it each month. Not true in a corporation and many people don’t realize what is going on with this nice little scam.
For companies organized as closed corporations (that’s most companies in the stock market today) getting a dividend means you have to have the following conditions met:
- First, there has to be excess cash flow for the company for that period; then
- Next, the company’s board of directors has to take a vote and decide they will go ahead and give you your money; then
- Next, the company’s board of directors has to decide how much of your money they will let you have (nice of them); then
- Finally, they decide to send you the money they decide you can have.
The problem with this circus is the money is your money, but company boards routinely decide they know more than the investor and decide to keep some or all of it to spend on other things, including things you may not like, but sorry for your bad luck.
Investments in securities private placement offerings may include opportunities to avoid this problem but you trade that all-important “investment liquidity” that stockbrokers say is the be all and end all of investment gotstohaves. The problem is that liquidity also works against you sometimes and that means you can wake up one day and find your investment is worthless because Wall Street had a bad trading day that had nothing to do with the business prospects of the company you invested in with your retirement money. Decisions have consequences and there are no easy choices, only pragmatic solutions.
There are no villains in this world and there are no victims – only volunteers.