Mark Armbruster
VIEWPOINT

It may be blasphemy, but I’m going to say it anyway: I don’t like dividends.

It is difficult to open an investment magazine or newspaper these days without seeing an article on the merits of generating investment income. The main argument usually is that since the largest part of our population is at or nearing retirement, investors will need to begin drawing income from their investments to meet their living expenses.

Accordingly, stocks paying dividends and bonds paying high rates of interest should be a primary focus in portfolio design. Adherents also note that dividend-paying stocks have historically outpaced non-dividend-paying stocks by a healthy margin.

High-income investing has entered the zeitgeist. Clients frequently ask me about the income their portfolios generate and whether we should be looking for higher-yielding investments. Because I have seen the downside to this approach, I take a dim view of it. I purchased a small investment firm a couple of years ago and integrated it into my company. The acquired company had an investment philosophy focused almost exclusively on producing current income, primarily through stock dividends. Other considerations, however, like long-term growth and risk, were largely ignored, as they often are with an income-centered investment strategy…