Water is rare in West Texas. Flowing water is even more scarce. In 1892 R.T. McElreath, great-grandfather of our founder Richard McElreath, settled a ranch in Hall County of West Texas. R.T. McElreath had the insight to buy land with natural springs flowing on it. These springs have continued to flow for over 100 years. During good times and bad, they have kept on producing to provide additional prosperity to the economic opportunities that the land affords.
There is a clear comparison that ties directly to our investment style here at Spring Capital Management and thus our name. Springs are like earnings or a dividend to the owner of a land investment. Whether it is land or stock, a steady return on the investment not only helps in challenging times, it gives the owner confidence to wait until prosperous times return. In good times, it enhances the return even further.
Thus we seek out these types of investments for our clients. Though past performance is not a guarantee of future results the analogy along with research data indicates you cannot ignore dividends. Many analysts have shown the power of dividends, recently one analyst's work showed 41% of the S&P 500's total return from 1926 until 2006* is attributed to dividends. That is powerful food for thought when it comes to serious investing. To think otherwise is fighting an uphill battle. We want to work with the market, not against it, so earnings and more specifically dividends are a key component of the securities we select.
*Footnote: Data obtained from Shannon Zimmerman article dated September 20,2007, "The Secret of Dividends" with the dividends being reinvested. Shannon Zimmerman is lead analyst for the Motley Fool newsletter service.
Investment Advisory Services offered through Spring Capital Management, LLC, Registered Investment Advisor