 Good day, fellow investors. Dividends are a key component to investment returns. And we don't talk that much about dividends, but those are very important. And in this video, I want to give you my opinion on dividends, the importance of dividends in my portfolio. I'll show you my portfolio yield per stock. What's the importance of dividends there? And then we'll also discuss in generally how important and have dividends been in history and how important those are now. So let's start. A great piece of research has been done by Professor Emeritus Edward McQuarrie from the School of Business at the Santa Clara University. With the paper Stock Market Charts, you never saw. And one part of that paper is focused on dividends discussing real and nominal returns. An investor who bought near the top of the 1920s bull market but reinvested all dividends grew an initial 10,000 investment into about 9.3 million and that was measured by 2009. Conversely, when valued in constant dollars, thus adjusted for inflation and with dividends spent along the way as a retiree must perforce do, the same 10,000 investment produced a bit more than 33,000 in real final wealth. The 300 fold difference captures the effect of omitting dividends and adjusting for inflation. Put another way, since 1928, dividends plus inflation accounted for 99.7% of the nominal wealth produced as of 2008 by investing in stocks. To put this into a chart, this is the result. The blue line is the nominal return on stocks 10,029 million and the red line is the real return on stocks with not reinvesting dividends. So inflation and dividends are a huge, huge chunk or 99.7% of your nominal stock market returns and therefore we have to really focus on it. However, dividends and inflation are not all. To put things into a chart, there are earnings. The business produces earnings. So if you are investing in businesses, your returns comes from the earnings yield that business produces. Plus also from inflation, but that has to take into account the assets that are constantly revalued if the business has quality assets and the power that the business has to increase prices. For example, if there is more demand for something, I don't know like copper in the future, businesses will be able to increase prices of copper and therefore adjust for inflation if inflation is related to demand for that metal in this case. So pricing power and earnings, pricing power or asset protection and earnings is what gives a big chunk of your long term returns. Now focusing on dividends is tricky here because dividends are just part of the earnings of the capital allocation management does. So management can allocate capital into new investments, can reinvest those earnings. So if I find a business that has a high return on invested capital higher than what would be my return or the dividend yield, what would be the dividend to a shareholder, then it's much better for them to reinvest the money. I don't know, Starbucks is a perfect example of such a company. If not, if they have capital that they cannot reinvest at that high rate, then it's better for them to redistribute that through dividends and buybacks. I prefer dividends or buybacks depending on the price. So if you have a great investor, a great manager, he's a great capital allocator. What Buffett does is capital allocation and he distributes between those three possibilities that he has depending on the opportunities in the market and what's the price, what's the return on that investment. One part of that is dividends. The problem is that the market doesn't give high dividends currently. Historically the mean has been 4.34% but over the last 30 years, remember dividends give you a big chunk of returns, dividends have been below 2%, around 2% and those are now 1.86%. The buyback yield is much higher but there can be a lot of discussion about buybacks. Sometimes it's better for you to get a dividend than to buy an already expensive stock that gives you just a 2% return on a dividend. So this is I think a problem, long-term problem because dividend yields are low, of course interest rates are low but let me show you my portfolio and put those into perspective because I think you can have both. You can have both higher dividends, both higher earnings, both growth, both asset protection so you can have it all if you focus on that. And 5% is a lot because the focus is not just on dividends, the focus is on earnings and dividends are just a result. All of those stocks reinvest the money, if you look at Gadsprom it has a price earnings ratio of what? 5% dividend yield still has 13% of the earnings or 60% of the earnings being reinvested for growth that should increase dividends in the future and also stock prices. But if I go back to my chart, dividends are just a part, if dividends are 5% return, if investments give me another 7% to 10%, 12% if you add the earnings, if you add the growth and then there is always buybacks 1%, 2%, not that much focus on my stock, then you get to a total return of 10%, 15%, 20% and plus if you buy below book value, if you buy real assets that have a profit, if you have pricing power, you also get inflation. So I really think you can have it all by simply looking at investments and this is also my message for dividend investors. Be sure to not just focus on dividends but mind all the other opportunities to gain returns to maximize your returns on investment. But dividends are still important especially in crisis and here you have to be very, very smart about it. Let me show you this. If we look at the historical yield back again to the chart, if we look what happens to the dividend yield when there is a market crash, the dividend yield of the market and of most stocks goes up because businesses continue to do what they have been doing especially good businesses. So 2009 dividend yield went from 2% to 3%, 2000s from 1% to 2%, 1970s from 3% to 6%, Black Tuesday that was the terrible Black Tuesday of 1929 went from 3.0% to 14% at one point in time in the debt of the depression. So those who have the power, the patience to reinvest the dividends really get huge returns but to reinvest dividends you have to get them at least in some form or businesses reinvest or dividends reinvest. My simple message is yes dividends but don't sacrifice all other things to get to those dividends. For example, if we look at this stock business, you see that the stock price goes up and down and also the dividend payout goes up and down. So you have 2009 crisis, dividend payout very low, then now the company is again in a crisis very low dividend payout. So this shows that the management is really forcing those dividends to push the stock price up to make things look really well but the intrinsic risk is very, very high. And sooner or later you might get the dividends for a few years but then when those risks materialize you are in very, very big trouble and a lot of general electric investors are in big, big trouble. Kraft Heinz also stable stock but high valuation, high dividend payout and then when the dividend cut comes then you are really, really in trouble. So be careful to focus also on the risks. To conclude, yes dividends, always great to get them, always great to reinvest them. It gives you that cash flow to take opportunities, take advantage of the opportunities that the market always gives. Therefore I will always take them happily but always focus on all the three components or four components of stock market returns. Assets, margin of safety, earnings, reinvestment, return on capital dividends and also buybacks. Thank you for watching. If you want to follow everything that I do, get the transactions, see all the stocks, see all the yields, see how those ideas might fit your portfolio, please check my stock market research platform. The link is in the description below. There is a 28 day money back guarantee so you practically have nothing to lose. Check it out, sit down, read the risk reward of each position, try to compare it to what you have and see whether there is something better for you for your portfolio, for your long term returns. We try to focus on both to maximize our long term returns. Thank you. Looking forward to your comments, tell me where are dividends, how important are dividends in your portfolio and I'll see you in the next video.