On The Money

Dividend policies can be vital investment guide by Mary Brown, president and chief operating officer of Campbell Newman Asset Management Inc.

Dividends are underappreciated and misunderstood by most investors. With average dividend yields at about 2.5 percent, too many see them as an insignificant part of potential total returns (total return = price change, plus income). They do not appreciate the impact dividends can have on improving performance while helping to control volatility. Most importantly, few understand that a company’s dividend policy conveys vital information from management about their discipline in allocating shareholder capital, as well as their confidence in the business and its future earnings power.

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