November 18, 2011
Investors have plenty to worry about lately, though that is nothing new. They were worried about Thai banks in 2004, and the Indonesian elections a dozen years back. Not all investors, certainly, but plenty of them, and there always seems to be some new thing to worry about, helpfully served up daily by the news media. Partly that's because investing is typically an intangible thing. You could buy a house and rent it out and be a landlord, but if you don't want to be a part-time plumber and collection agent, you might invest in stocks, bonds, mutual funds, annuities, and so on. Those are things you can't see, touch, or taste; and investing tends to require faith that someday you will have more than when you started. So what can you do? You can worry.
But some investments mean less worry than others. US Treasury bills are practically default-free, no matter what S&P says. But beyond low-yield notes, something sure to reduce worry is cash flow. After all, if you invest a dollar and get a nickel back next week, you don't have to worry about a dollar anymore: you can cut back your worry to 95 cents worth. But there are too many companies that are mature and profitable yet don't pay cash dividends to their shareholders (owners!). Today I'll mention one that does, a smallish ($1.5 billion) insurance company named RLI. I first learned about RLI when they handled my personal umbrella liability coverage, then cancelled my policy after our daughter got her driver's license at age 16. No accidents or tickets, just a youthful driver in the house, and they didn't want the risk. I wasn't too happy about being cancelled. But RLI shareholders have been happy about the cash dividends paid by their shares: especially about the extra $7/share paid last December and another extra $5 declared today.
Cash dividends alone do not make for a good investment, and you should never invest in anything you read about in this (or any other) blog without talking to a knowledgeable advisor first. But the concept is sound: cash dividends are real, tangible results, and are always worth a look when you are looking to invest.
GTC
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).