“The best business to own is one that can employ large amounts of incremental capital over an extended period at very high rates of return.” — Warren Buffett, 1992 Berkshire Hathaway Shareholder Letter.
Hello School of Investing this post has got The IGP Paradox thinking.... in why "getting paid today" is often the most expensive mistake an investor can make. Fully on board with this—chasing a 7% yield is usually just a slow-motion car crash disguised as a "stable" investment.
The "Snowball" vs. The "Ice Cube"
The math here hits on the ultimate psychological hurdle: you have to be willing to look "underpaid" for a decade to be exponentially wealthy in the second.
I love your "Retained Earnings" logic. When a company like Visa keeps 75% of its profits, it isn't "withholding" your money—it’s hiring the world’s best engineers to turn your $1 into $1.30. A high-yield "Ice Cube" is essentially admitting, "We don't have any better ideas for this cash than you do," which is a pretty grim confession for a billion-dollar enterprise.
Question: The Desert Island Debate
If you were stuck on a desert island for 20 years, what would you prioritize: a high ROIC or a 50-year dividend streak? Personally, The IGP Paradox would take the ROIC every time. A "Dividend King" can easily become a victim of its own PR—squeezing the business dry just to keep a title while the engine starts to smoke.
What do you think: Is a high ROIC a better predictor of wealth than a long dividend history, or is the "King" title the ultimate proof of a durable moat?
Great insights. I would definitely take the ROIC every time. I think companies with higher ROIC are a better predictor of continued dividend growth. The perfect example is JNJ, a long dividend payer with 12+ years of 15%+ ROIC or better.
Hello School of Investing this post has got The IGP Paradox thinking.... in why "getting paid today" is often the most expensive mistake an investor can make. Fully on board with this—chasing a 7% yield is usually just a slow-motion car crash disguised as a "stable" investment.
The "Snowball" vs. The "Ice Cube"
The math here hits on the ultimate psychological hurdle: you have to be willing to look "underpaid" for a decade to be exponentially wealthy in the second.
I love your "Retained Earnings" logic. When a company like Visa keeps 75% of its profits, it isn't "withholding" your money—it’s hiring the world’s best engineers to turn your $1 into $1.30. A high-yield "Ice Cube" is essentially admitting, "We don't have any better ideas for this cash than you do," which is a pretty grim confession for a billion-dollar enterprise.
Question: The Desert Island Debate
If you were stuck on a desert island for 20 years, what would you prioritize: a high ROIC or a 50-year dividend streak? Personally, The IGP Paradox would take the ROIC every time. A "Dividend King" can easily become a victim of its own PR—squeezing the business dry just to keep a title while the engine starts to smoke.
What do you think: Is a high ROIC a better predictor of wealth than a long dividend history, or is the "King" title the ultimate proof of a durable moat?
Great insights. I would definitely take the ROIC every time. I think companies with higher ROIC are a better predictor of continued dividend growth. The perfect example is JNJ, a long dividend payer with 12+ years of 15%+ ROIC or better.