Dividends: A Slow Accumulation of Slightly Less Trouble

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The market, as anyone who’s spent more than five minutes observing it will tell you, has developed a peculiar habit of behaving as if basic arithmetic is merely a suggestion. Fundamentals? They’re less a foundation these days and more a sort of decorative frippery. In times like these, those of a cautiously pessimistic disposition – a demographic that, let’s be honest, comprises a significant portion of the thinking populace – might find some comfort in the quiet reliability of a dividend. It’s not a guarantee, of course. Guarantees are usually provided by people attempting to sell you something that isn’t worth the parchment it’s written on. But it’s…less alarming than hoping the latest Meme Stock won’t plummet faster than a goblin with a bad parachute.

Dividend-paying stocks offer a stream of income, a trickle of resources against the potential flood. It’s not *getting* richer, precisely. It’s more…avoiding poorer at quite the same rate.1 And let’s be clear, it requires a modicum of faith. Faith that the company in question can actually *afford* to send you cheques, or these days, deposit a few coppers into your digital pouch. Here are three establishments warranting a closer look, as of this particular rotation of the celestial spheres.

1. Realty Income: The Monthly Ritual

Realty Income (O), somewhat grandiosely self-designated ‘The Monthly Dividend Company’, is a Real Estate Investment Trust, or REIT, as the initiates call it. These are essentially alchemists of property, turning bricks and mortar into a steady, if unspectacular, flow of funds. They benefit from a rather curious loophole in the tax laws – allowing them to sidestep certain levies if they distribute at least 90% of their taxable income to shareholders. It’s the economic equivalent of a wizard who agrees to share his spellbooks if you promise to keep the villagers supplied with slightly better ale.2

Their payouts aren’t entirely fixed, naturally. The flow of coin is tied to the fortunes of the tenants. However, Realty Income has a reputation for solidity, a certain…predictability. The current yield hovers around 5.6%, and their commitment to monthly dividends has spanned three decades – a feat rarely seen outside monastic orders. Furthermore, they’ve managed to coax their annual payout upwards at a compound rate of 4.3%. This is not explosive growth, to be sure. But in a world obsessed with instant gratification, slow and steady has a certain…dignity.

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They operate on a ‘triple net lease’ model, which means that the tenants shoulder the burdens of property taxes, maintenance, and insurance. Think of it as renting a space, but also inheriting all the small inconveniences that usually fall to a property owner. This naturally confers some negotiating leverage. Realty Income focuses on businesses that sell necessities—things people will buy even when the dragon’s hoard is looking a little thin—and operate with minimal fuss.

In the recent accounting period3, they generated Adjusted Funds From Operations (AFFO – a concept akin to ‘free cash flow’ for those versed in the arcane arts of REIT finance) of $4.19 per share, while distributing approximately $3.13 in dividends. A reassuring margin, suggesting they’re not simply borrowing from St. Dismas to pay the shareholders.

2. Pfizer: The Post-Potion Blues

Pfizer (PFE) is a name even those who avoid the healing arts will recognize, largely due to its pivotal role in handling the recent…unpleasantness involving microscopic agitators. However, since peaking during the height of the crisis, the stock has experienced a rather noticeable decline – about 34% over the last five years. The market, it seems, has decided that saving humanity is a one-time revenue stream. A harsh judgement, perhaps, but markets are rarely known for their sentimentality.

In an attempt to diversify beyond pandemic remedies, Pfizer invested a staggering $43 billion in acquiring Seagen, specializing in cancer treatments. The hope is to generate approximately $10 billion in additional revenue by 2030. A bold ambition, which hinges, as all bold ambitions do, on the unpredictable whims of fate and regulatory bodies. They’ve also pledged to achieve $7.2 billion in cost savings by 2027. A worthy goal, assuming they don’t accidentally dismantle the entire organization in the process.

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Despite past missteps – a rather dramatic halving of the dividend in 2009 – Pfizer has consistently increased its quarterly payout since then, currently yielding a respectable 7.1%. A high yield, to be sure, but backed by a trailing-12-month free cash flow yield of 8.14%. The numbers, at least, appear…stable.

Management has faced scrutiny concerning the long-term sustainability of the dividend, particularly given patent expirations, fluctuating tariff rates, and the somewhat ominous pronouncements of certain geopolitical figures regarding pharmaceutical pricing. However, their Chief Financial Officer has repeatedly emphasized the company’s “steadfast commitment” to maintaining – and growing – the dividend, viewing it as a crucial component of their financial strategy.

3. Sirius XM: Echoes of a Revival

Sirius XM Holdings (SIRI) represents a more…complex narrative. It’s a recovery story in progress, a testament to the fact that even digital audio companies can experience periods of profound despair. The stock has fallen approximately 60% over the past five years, a particularly steep decline. Management, however, has hatched a ‘revival plan’, offering investors a yield of nearly 4.7% while they await the results. A sort of…hopeful wager.

The company, owner of Sirius satellite radio and the Pandora streaming service, has faced stiff competition from the likes of Spotify, and subscriber numbers have wavered accordingly. Last year, they unveiled a long-term strategy to add 10 million subscribers, reaching a total of 50 million, and boost free cash flow by 50%, to $1.8 billion. A grand vision, requiring a degree of marketing wizardry and a healthy dose of luck.

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The plan involves streamlining pricing, expanding their advertising business, and acquiring the rights to popular podcasts. There was some indication of momentum towards the end of 2024, with subscriber numbers showing some growth, but the first quarter of 2025 witnessed a net loss of over 300,000 subscribers. A humbling reminder that the winds of fortune can shift unexpectedly.

Despite these setbacks, Sirius XM remains an intriguing option for dividend seekers. They anticipate generating $1.15 billion in free cash flow this year, while current projections suggest annual dividend payments of only $364 million. A comfortable margin of safety, allowing for a little…wiggle room.

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1

One might also argue that it’s a way of turning time into money, albeit at a rather slow and deliberate pace. The alchemists would be proud, assuming they weren’t too busy trying to transmute lead into gold.

2

This comparison, while ostensibly humorous, should not be taken as an endorsement of regulatory loopholes. Though, it *does* explain a great deal about the current state of affairs.

3

The ‘recent accounting period’ is a nebulous term, deliberately employed to avoid the unsettling precision of specific dates. Time, after all, is an illusion. Lunchtime doubly so.

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2025-08-04 07:52