Breaking returns into earnings growth, multiple change, and dividends is useful because it shows why dividend growers can still win when multiples compress. Over decades, the compounding EPS path matters more than hoping for another multiple-expansion decade.
The Microsoft 2000-2010 breakdown is a mandatory case study. An operational machine compounding at over 9% while the valuation gets cut in half. A decade of zero price progress despite the underlying engine running at full speed. It is a perfect reminder that the entry multiple acts as a gravitational pull on owner earnings. When expectations outpace reality, double-digit growth spends years just filling the hole. A sharp, necessary breakdown. (At least that's how I look at it).
Breaking returns into earnings growth, multiple change, and dividends is useful because it shows why dividend growers can still win when multiples compress. Over decades, the compounding EPS path matters more than hoping for another multiple-expansion decade.
Agree completly. I prefer growth for yield payouts. I recently highlighted the best Dividend Aristocrats based on their dividend growth rates. https://dividends4me.substack.com/p/20-best-dividend-aristocrats-for?r=41wa6m
More importantly, they highlight the value of long-term perspective: staying invested despite short-term pain.
The Microsoft 2000-2010 breakdown is a mandatory case study. An operational machine compounding at over 9% while the valuation gets cut in half. A decade of zero price progress despite the underlying engine running at full speed. It is a perfect reminder that the entry multiple acts as a gravitational pull on owner earnings. When expectations outpace reality, double-digit growth spends years just filling the hole. A sharp, necessary breakdown. (At least that's how I look at it).
Flo ✌🏻