Common Stocks and Uncommon Profits and Other Writings

 
When to Sell 
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You may be thinking all this sounds fine, but actually classmates are
not common stocks. To be sure, there is one major difference. That dif- 
ference increases rather than decreases the reason for never selling the 
outstanding common stock just because it has had a huge rise and may 
be temporarily overpriced. This difference is that the classmate is finite, 
may die soon and is sure to die eventually. There is no similar life span
for the common stock. The company behind the common stock can 
have a practice of selecting management talent in depth and training 
such talent in company policies, methods, and techniques in a way
which will retain and pass on the corporate vigor for generations. Look 
at Du Pont in its second century of corporate existence. Look at Dow 
years after the death of its brilliant founder. In this era of unlimited 
human wants and incredible markets, there is no limitation to corporate 
growth such as the life span places upon the individual. 
Perhaps the thoughts behind this chapter might be put into a single 
sentence: If the job has been correctly done when a common stock is 
purchased, the time to sell it is—almost never. 

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7
The Hullabaloo about
Dividends
T
here is a considerable degree of twisted thinking and general 
acceptance of half truths about a number of aspects of common 
stock investments. However, whenever the significance and impor-
tance of dividends are considered, the confusion of the typical investor 
becomes little short of monumental. 
This confusion and acceptance of half truths spreads over even to the
choice of words customarily used in describing various types of dividend 
action. A corporation has been paying no dividend or a small one. Its 
president requests the board of directors to start paying a substantial div- 
idend. This is done. In speaking of this action he or the board will often 
describe it by saying that the time had come to “do something” for 
stockholders. The inference is that by not paying or raising the dividend 
the company had been doing nothing for its stockholders. This could 
possibly be true. However, it certainly was not true just because no div-
idend action had been taken. It is possible that by spending earnings not 
as dividends but to build a new plant, to launch a new product line, or
to install some major cost-saving equipment in an old plant, the man- 
agement might have been doing much more to benefit the stockholder 
than it would have been doing just by passing these earnings out as div-
idends. No matter what might be done with any earnings not passed on 
as dividends, increases in the dividend rate are invariably referred to as 
“favorable” dividend action. Possibly with greater reason, reduction or 
elimination of dividends is nearly always called “unfavorable.” 
One of the main reasons for the confusion about dividends in the 
public mind is the great variation between the amount of benefit, if any, 

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