Contrary to the common thought of investing in stocks and obtaining capital gains through its appreciation, the main return of investments in stocks over the long term occurs through dividends distributed to shareholders. Companies that generate surplus cash after investments provide sustainable growth and are potentially distributing dividends that offer competitive compensation to shareholders in relation to other instruments available in the financial market.
In companies that continuously grow, not only do profits increase, but also their dividends. And, at the same time, depending on the behavior of the market, the shares can increase in value. When dividends are reinvested in shares of the company itself or others with the same profile (i.e., good dividend payers), the additional shares generate even more dividends, creating a virtuous circle of continuous growth in the number of shares and dividends generated. Companies that pay dividends and grow, like many that are found in the Small Caps universe, are even more interesting and a preferred target for investments by Trígono, as they demonstrate the ability to invest and grow and still distribute dividends above the market average. This growth will leverage an increase in profits and, as a result, the ability to further increase shareholders’ compensation via dividends, reducing their dependence on the simple appreciation of shares, especially at times when share prices or the stock market take a hit.