Dividends and Truth

There are two types of truth:

• Political truth
  • True because many other people think they are.
  • True because many people believe it to be true, often influenced by social consensus.
    • ^{_{Political truths are true because many people believe them (e.g., who the president is, a country’s border). This is a psychological phenomenon; changing widespread belief changes the “truth.”}}
• Technical truth
  • True for physical or technical reasons.
  • True for physical or technical reasons, independent of human opinion.
    • ^{_{Technical truths are based on physical or technical reasons (e.g., an equation’s result, a virus’s diameter). What people think doesn’t change them.}}

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• Stock Market and Dividends
  • Stock Market Prices as Political Truths:
  • Stock market prices and valuations are often based on political truths.
  • Stock market prices and valuations are given as examples of political truths, which can be subject to market hype and fluctuate significantly.
    • In contrast, dividends are presented as technical truths because they are based on actual cash payments from a company’s profits. The payment of dividends is not influenced by external opinions or market hype but is determined by the company’s financial performance.
• Dividends as Technical Truths
  • Dividends are either paid or not paid with no ambiguity.
  • Dividend payments come from the company’s cash flows and are not influenced by stock market perceptions or investor sentiment.

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