General Mills has paid a dividend every year since 1898.
And for the past decade while dividend investors collected their cheques... the stock itself quietly lost 41% of its value.
You'd have been better off keeping the money in a savings account and never touching the market.
This week, the Wall Street Journal ran a piece on the quiet comeback of high-dividend stocks.
Conagra yielding 6%… Campbell's at 7.4%… Kraft Heinz pushing double digits.
Against a 10-year Treasury sitting below 4.4%, those numbers look seductive.
And there's a smidgen of logic to it.
Unlike bond interest, dividends can keep pace with inflation. Plus you pay less tax on qualified dividends than on bond coupons.
So the math checks out… on paper at least.
But there’s another part missing from the equation…
Kraft Heinz stock is down 57% over 10 years…
Campbell's down 54%…
Conagra down 41%…
The S&P 500, with its skinny 2.1% yield from a decade ago, returned 324% in the same period.
Meaning that the dividends from those household names… didn't come close to making up the gap… they were a mere consolation prize for owning a deteriorating asset.
Because you gotta remember this… any cash a company pays out instantly reduces its own share price.
A company yielding 8% isn't handing you free money... it's returning your own capital to you while the stock goes down.
And if that yield is high because the stock keeps falling… that's called a dividend TRAP. The income looks attractive precisely because the market has already priced in the bad news.
AT&T was yielding close to 7% before they slashed the dividend in 2022 and Walgreens looked generous right up until they suspended it entirely. These are names long lauded as perfect retirement stocks.
Yet shareholders owning them ended up with less money than they put in… even when you factor in the dividend payouts.
What’s worse is that investor surveys consistently show that people treat dividends as separate from the stock price… as if the cheque arrives independently of what the underlying business is doing.
It doesn't. And a company that pays out 6% a year has 6% less retained earnings to invest in growing the business.
Which brings me to the Wheel.
The Wheel Strategy is built around selling options contracts on stocks you'd be happy to own anyway — collecting premium (cash) upfront as payment for agreeing to potentially buy those shares at a price you've already decided is fair.
When done on stable, quality businesses, you're not waiting for a quarterly cheque from a company that may or may not cut it. You're generating your own income, on your own schedule, from assets you've deliberately chosen.
The difference is control…
With dividends… you’re a passenger… waiting to be paid, hoping the board doesn't change its mind.
With the Wheel, you’re the driver… deciding when income is generated… on what stock… at a price you’re happy with.
General Mills yields roughly 4% annually at the moment. A Wheel trader targeting similar stocks can realistically aim for 3-4x multiples of that.
Oliver