The dividend trade sure seems played out so I was shocked to see Cramer still pushing dividend stocks on Mad Money. Still no mention of Net Payout Yields. Still ignoring buybacks. Why?
What is a dividend after all? Isn't it just the company returning capital to shareholders? Aren't investors more concerned about where the dividend money is coming from?
This is exactly where investors apparently get lost. What matters is the earnings yield. The profits divided by the market cap. Is FirstEnergy (FE) a better investment because it pays a large portion of earnings to shareholders or is Apple (AAPL) better because it grows a lot faster and trades at a lower PE?
Does AAPL become a better investment by paying a 5% dividend? Everybody knows it can afford such a yield.
Lately investors have become confused with what a company earns and what the company pays out to shareholders. Don't get those concepts confused or you'll get burned by the apparent latest bubble.
The ability to earn consistently growing profits is the ultimate key. Yes, that concept is usually manifested by the dividend yield, but your missing the forest for the trees if that is the sole focus.
Disclosure: Long AAPL. Please review the disclaimer page for more details.