Dividends as evidence

Profit involves judgement. Cash paid out to shareholders does not — the money either left the company or it did not.

That makes a long dividend record genuinely informative. A company that has paid consistently through good years and bad has demonstrated something no ratio can.

What to look for

• Consistency over years, rather than one large payment.
• The cash-to-bonus mix. Persistent bonus-only payouts may mean profit is not converting to cash.
• Payout ratio. Paying out nearly everything leaves nothing to grow with; paying nothing needs a reason.