Dividends: A Modest Proposal

Now, the business of investing, one finds, is often presented as a terribly serious undertaking. All gloom and doom, and talk of bear markets and whatnot. A dashedly unsettling business, really. One is led to believe a chap must be a financial wizard to avoid ending up in the poorhouse. Poppycock, I say! A little common sense, a dash of skepticism, and a willingness to accept a modest return are, in my experience, quite sufficient. The truly clever investor, you see, isn’t aiming for the moon; he’s simply hoping to avoid a catastrophic plummet.

The current enthusiasm for ‘growth’ stocks strikes me as a bit…fanciful. Chasing these elusive butterflies, as it were. Far more sensible, wouldn’t you agree, to seek out companies that actually produce something – or, failing that, at least distribute a portion of their earnings to shareholders? Dividends, you see, are a most agreeable form of income. A steady trickle, rather than a frantic scramble for a fleeting fortune.

I’ve been casting a rather jaundiced eye over the market lately, and have unearthed a trio of companies that, while not exactly setting the world on fire, appear to be reasonably solid – and, crucially, willing to share the spoils. Don’t mistake this for a ringing endorsement, mind you. Just a suggestion that they might not be the worst places to park one’s funds.

A Watery Proposition

First, we have American States Water (AWR +2.63%). A most unassuming name, I grant you, but the company itself is, if nothing else, remarkably persistent. They provide water – a necessity, you see – and have been doing so for nearly a century. A chap can’t very well argue with a business built on the fundamental requirement for hydration. They’ve paid a dividend since 1931, and raised it every year for seventy years running. A truly impressive feat, and one that suggests they’re not entirely incompetent. They’re what one might call ‘Dividend Kings’ – a rather grand title for a water company, but I suppose one must give credit where it’s due.

At the current price, the dividend yields a respectable 2.7%. Not enough to make one a millionaire overnight, of course, but sufficient to provide a small cushion against the inevitable financial calamities that life throws our way. Their payout ratio is a comfortable 56.2%, meaning they aren’t stretching themselves too thin. They’re operating with a margin of 30.9% and a net margin of 20.4%, which suggests they’re not entirely devoid of business acumen. One suspects they could continue this charade for another thirty years, and perhaps even become ‘Dividend Emperors’. A rather preposterous title, but one can dream, can’t one?

The Ram in the Portfolio

American States Water is a perfectly serviceable dividend grower, but its yield is a trifle low for a chap seeking a more substantial income. One might consider adding a higher-yielding dividend payer to the mix, just to add a bit of spice. And for that, T. Rowe Price Group (TROW +0.64%) appears to be a reasonably solid choice. They’ve been shuffling around financial assets since 1937, and now manage a staggering $1.78 trillion. A truly enormous sum, and one that suggests they’re not entirely inept at the game.

At the moment, T. Rowe Price pays a dividend yielding 5.3%. A considerably more attractive proposition than American States Water, wouldn’t you agree? They’ve lowered their payout ratio from 71.6% to 55% since 2022, which suggests they’re becoming even safer. They’re showing net revenue growth of 3% to $7.31 billion, with operating margins of 31% and net margins of 28%. Their logo is a ram, which strikes me as a rather aggressive choice for a financial institution, but one mustn’t judge a book by its cover, as they say.

A Fizzy Diversion

Finally, we have PepsiCo (PEP 0.75%). Whether one prefers Coke or Pepsi is a matter of personal taste, but PepsiCo is a company that, while not entirely without its flaws, appears to be reasonably well-established. Their yield currently sits at 3.38%, placing them somewhere between American States Water and T. Rowe Price. They’re a bit riskier than the other two, admittedly. In 2025, they paid out $7.92 billion in dividends, while their operating cash flow was only $6.62 billion. A rather alarming discrepancy, wouldn’t you say?

However, they did spend $1.65 billion acquiring a prebiotic soda brand called Poppi, which likely skewed their cash flow numbers. Revenue grew 5.6% in the fourth quarter and 2.3% for the full year. EPS declined 14% overall, but surged 68% in the fourth quarter. A mixed bag, to be sure, but they’ve raised their dividend for 53 years running, and one suspects they’ll continue to do so for the foreseeable future. Without the acquisition of Poppi, their payout ratio would likely be in the low to mid-70% range, which is perfectly acceptable.

So, there you have it. A trio of companies that, while not exactly thrilling, appear to be reasonably solid – and willing to share the spoils. A modest proposal, perhaps, but one that might just save you from financial ruin. And in the current climate, that, my dear fellow, is nothing to scoff at.

2026-02-14 00:13

A Watery Proposition

The Ram in the Portfolio

A Fizzy Diversion

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