You don’t have to understand a company for it to pay you

If you ask me to tell you about Amgen, the biotechnology company, I wouldn’t have much to say.

I know it makes a crap ton of money because, well, there are a crap ton of sick people in this world who use the various therapies it cooks up to feel better.

Outside of that, though, I don’t know all that much about the company … and I’m a shareholder. I know, I know … bad idea, right? Most investors would probably say you should understand a company inside and out before throwing cash at it. And I agree. You probably should.

That doesn’t mean you have to, though. I can confidently say I have a grip on what most of the companies in my portfolio are up to – how they make money and how they plan on growing their businesses – but I’m willing to admit there are a few, like Amgen, I’m not as on top of.

Is that wrong? Does that make me a bad investor?

I don’t think so. I mean, that’s what all the numbers are for, right? I didn’t buy a share of Amgen because I understand and believe in its business model. I bought a share because the numbers looked good when I purchased it. The company makes a lot of money and redistributes some of it to shareholders in the form of a $4.60 annualized dividend. That’s what drew me in.

I bought a share in April for $165.06. Today, that share is worth $181.85. Why? Hell if I know. I guess its medicines are working. It’s also making money hand over first, posting earnings of $3.27 a share last quarter (beating expectations by $0.16 a share). On top of that, Amgen grew its earnings per share 17.81% last quarter vs. the same quarter from the prior year.

Oh, and that dividend …

Today’s Dividend

Amgen: AMGN passed along a $1.15 payment for the one share I own. Like I said before, I’m not an Amgen expert, but the dividend is certainly something I understand. The $4.60 annualized dividend equates to a yield of about 2.5%. Amgen has a pretty low payout ratio (41.89%) and has been boosting its dividend for each of the past six years … by a lot. The company’s dividend has grown at an annualized clip of 28% over the course of the past three years.

With growth like that, do you really need to understand the ins and outs of Amgen? Its dividend tells me all I need to know. In other words, I like its dividend (and potential to raise it) enough to have the company in my portfolio despite knowing next to nothing about its business or its products.

Make sense?

The $1.15 Amgen paid me Friday brought my September total to $8.52 and my lifetime dividend mark to $208.29.

March on!

Leave a Reply

%d bloggers like this: