Before dinner tonight I sat down and started reading some business articles from around the area. Usually, I’m not terribly impressed with the literary options in the local paper or the internet news sites I frequent, but on occasion I’ll come across one and find myself cheering the author on as I read.

Such was a column I read today about stock dividends and how the crash of the dot-com era turned the investment world on its head. It’s rare that profits are being filtered back to the owners of the company (i.e. the shareholders).

To own stock literally means to own part of a company. To really put it in perspective, when you own shares of a company, you partake in the success or failure of your company.

Jon Hall wrote an article about that very subject, and how within the last 6 years or so the number of companies who pay out dividends, or a portion of the profits, to shareholders has dwindled.

If companies paid dividends like they used to, there would be a normalizing of the stock market, a truer correspondence between the market and the real economy. Returning profits to the shareholders would make for better transparency than we currently have, because chief financial officers would be unlikely to report inflated or nonexistent profits if they had to turn right around and send out dividend checks. And if they were to do so, they’d get apprehended immediately after shareholders began to squawk about missing checks. -Source“

Sure makes a strong case for finding stocks who return profits to the owners, doesn’t it?

Of course, with inflated CEO compensation, golden parachutes, sky high incentive packages, so much of that “profit” is chewed up by inflated expenses.

Many chief executives and corporate boards do not seem to think profits belong to the owners. Besides, they know better how to use the profits than do mere owners. How else are they to pay for their bonuses, perks, company jets and golden parachutes? And don’t forget about those oh-so-special shower curtains (see Tyco). -Source“

Hall makes a great case for looking at companies who have a focus on shareholder value, and knowing that stockholders should benefit from company success.

Keep in mind that this is not to say all stocks that pay a dividend are good stocks to hold, but it sure makes it easier to filter out the corporate greed…

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