Dividends and delay gratification

So much of investing, as so much of life, is a push-pull between the present and the future.

The better you resist the temptation to overeat bad foods now, the healthier you'll be in the future.

Same with exercise -- the more healthy exercise you do now, the better you'll be in the future.

The more money you save now, the more you'll have in the future. If you go into debt, you're really stealing from you're own future.

Yet it's so difficult to follow this through consistently. I've tried to tell young adults that they should start saving money, and they just start giving me excuses. Someday they'll be 50 or 60 and wish they'd taken my advice -- but they won't listen now. They'll have to learn the hard way. They just won't be convinced that if they'd work hard now, save a lot of money and let it grow, they could live like queens and kings in later life.

But "later life" is just not real to them yet. Drinking with their friends tonight is. The latest CD is real. The latest electronic toy. They just don't believe that if they give up those things now, they'll have much more pleasure later.

There's a similar dynamic with income investing. The best long-term income investments are the stocks of good dividend paying companies that consistently raise their annual dividends. Mergent has a list of about 300 companies that had raised their dividends every year for at least 10 years.

Yet, because the current dividend yield is so low, many income investors buy bonds, for the higher yield today. Even though the semi-annual coupon of bonds never goes up.

In 20 years, the dividend-paying stocks will be paying far more for the money they cost than bonds. But it will take 15 years or more to get to that point, and who wants to wait that long?

dividend investments
dividend investments