At The Money: Can Dividend Investing Give You Yield AND Growth?

Apple

Across the shows: 7 speakers in other episodes, 1 bullish and 5 bearish calls, past 30 days

• David Bahnsen · The Bahnsen GroupBearish

  Apple holds hundreds of billions in cash instead of returning it, which Bahnsen objects to.

  When companies cannot reinvest their cash at high returns, they either hold it in cash management vehicles or do M&A. Bahnsen cites Apple, which has held large cash balances for years, and argues shareholders should not want that cash sitting idle.

  “Apple's been doing this forever. So do you want Apple holding on to hundreds of billions of cash in their own cash management vehicles?”at 6:19

Citigroup

Across the shows: 3 speakers in other episodes, 2 bullish and 1 bearish calls, past 30 days

• David Bahnsen · The Bahnsen GroupBearish

  Citi's dividend was unsustainable, funded by 10% borrowings from Gulf investors, so Bahnsen sold at $51 in 2007.

  In October 2007 Citi said it would not cut its dividend, but it had just borrowed $10.5 billion from Saudi and Kuwaiti investors at about a 10% coupon. Bahnsen sold at $51 a share, and the stock later fell about 99%. He argues that borrowing to pay a dividend is not how a dividend is sustained, and cites Citi as the clearest warning sign.

  “Because they said, we're not cutting the dividend but we just borrowed $10,500,000,000 from the Saudi Arabians and Kuwaiti's at I think it was a 10% coupon on the debt.”at 12:07

Walmart

Across the shows: 5 speakers in other episodes, 3 bullish and 2 bearish calls, past 30 days

• David Bahnsen · The Bahnsen GroupBearish

  Walmart's yield fell to 1.5% after a 60% rally, so Bahnsen sold it on valuation.

  Walmart rose about 60% in one year, pushing its dividend yield from a 3.5% historical average to 1.5%, roughly the S&P 500 level. Bahnsen says the company did nothing wrong, but he sold it because the valuation no longer offered the expected return he wanted.

  “Walmart went public the year before I was born and grew the dividend every year of my life. They didn't do anything wrong. They just happened to go up 60% in one year in stock price.”at 15:00

Broadcom

Across the shows: 4 speakers in other episodes, 4 bullish and 1 bearish calls, past 30 days

• David Bahnsen · The Bahnsen GroupBearish

  Broadcom's yield fell to 1% after a 16x rise, so Bahnsen sold it on valuation.

  Broadcom's stock rose 16 times while it grew its dividend 8% to 14% a year for eight straight years, so the yield compressed to about 1%. Bahnsen uses yield as a valuation metric and sold to move into names yielding 3% to 4%. He notes that Broadcom was one of his most profitable investments over seven years and that the AI build-out needs data centers.

  “Same with Broadcom, you know, the stock was up 16 times. They had grown the dividend 8% per, 14% per year for eight years in a row, but the yield got to be 1%.”at 15:22

McDonald's

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• David Bahnsen · The Bahnsen GroupBullish

  McDonald's reinvested dividends have compounded to about a 400,000% return; a top dividend grower.

  Bahnsen cites McDonald's reinvested dividends as having created a roughly 400,000% return. He also notes that in 2008 only Walmart and McDonald's were up among Dow stocks, showing the defensive quality of these dividend growers.

  “And so you look at a company like McDonald's that has literally created with reinvested dividends 400000% return.”at 21:06

Simon Property Group

• David Bahnsen · The Bahnsen GroupBullish

  Simon Property Group is among the most profitable REITs ever, compounding through two 60% drawdowns.

  Bahnsen calls Simon Property Group the most profitable REIT ever for investors, despite two drawdowns of about 60% during COVID and the financial crisis. He argues that long-term compounding of its dividend turns decades-old purchases into large annual cash yields on cost.

  “You look at a company like Simon Property Group, it's the most value, the highest, most profitable for investor REIT ever concocted.”at 21:17

Blackstone

• David Bahnsen · The Bahnsen GroupBullish

  Blackstone's dividends now yield about 30% a year on Bahnsen's 2011 purchase cost.

  Bahnsen bought Blackstone in 2011, after its IPO at the time of the financial crisis. He calls it one of the great dividend growers of the last decade and says its dividends now equal about 30% a year of what he paid, showing the compounding power of a growing dividend.

  “Blackstone only went public at the time of financial crisis. I bought it in 2011. We're getting 30% per year on what I paid for the stock in dividends.”at 22:05

AI infrastructure & data centers

• David Bahnsen · The Bahnsen Group

  AI capex has pushed top cash generators to negative FCF, a riskier profile than dividend payers.

  Some of the largest free cash flow generators in history are now FCF-negative because AI capex is so high. Bahnsen does not predict how this plays out, but argues that companies still profitable, growing and returning free cash flow to shareholders carry a different, lower risk profile than capex-heavy AI leaders.

  “We are in a moment in this AI period where some of the largest free cash flow generating companies in history are now negative free cash flow because the CapEx is so high.”at 3:31

IPOs, M&A & deal activity

• David Bahnsen · The Bahnsen Group

  Most CEO-led M&A is vanity projects that destroy capital, with a few synergistic exceptions.

  When companies cannot reinvest cash at high returns, CEOs often turn to M&A. Bahnsen argues most deals are vanity projects and capital-destructive, while acknowledging a few have been synergistic. He contrasts this with the high return on equity he sees from great dividend growers.

  “CEOs are notorious for M and A. And I would suggest that most M and A has served to be vanity projects and capital destructive.”at 6:33

Earnings & corporate profits

• David Bahnsen · The Bahnsen Group

  Record buybacks haven't cut share counts; they mainly serve as executive compensation, not shareholder returns.

  Share counts are higher than before despite record buybacks, so net share issuance is not negative. Bahnsen says buybacks, especially in Silicon Valley, mostly serve as executive compensation. Buybacks are also cut first when a company runs into trouble, while dividends tend to be protected. His portfolio had zero dividend cuts through the financial crisis and the COVID period.

  “The problem, Barry, is that more often than not, they're not a way to return capital to shareholders. How do you have record levels of share buybacks and yet more shares that exist now than did before?”at 7:31

US stock market outlook

• David Bahnsen · The Bahnsen Group

  Dividend growth portfolios beat the S&P in the 2000-2009 bear market, returning about 7-8% a year.

  Bahnsen says the S&P 500 went nowhere from 2000 to 2009, while most dividend growth portfolios returned roughly 7-8% a year. He concedes that from 2009 to 2026 the S&P compounded about 15% a year, so dividend growth lagged in some years, but he argues it matched or beat the market in about half of the years.

  “Most dividend growth portfolios would have been up somewhere in the range of [7-8]% per year.”at 18:01