In The Future for Investors, Jeremy Siegel presents definitive evidence why what we do yields superior returns. The proof is twofold: not only do we purchase the right stocks, but we avoid the common pitfalls. Hence: superior returns. I never thought, when I began my letter some twenty five years ago, that this would be the case. I started the list looking for safe common stocks for GIC refugees. I ended up with superior returns too. It was quite by accident the strategy started. Then I began to realize how great the results were. The Future for Investors, with its massive data base-Siegel "followed the performance of each of the original stocks in the S&P 500 index" from 1957- confirms our findings. Interestingly, Siegel says the "exhaustive study changed my views of the best investment strategy". Siegel used to be believe indexing was best.

To get an idea of what The Future for Investors is about, while standing in your favourite independent book store (that's Novel Ideas here in Kingston), read pages 241 and 242. Jeremy Siegel distills "the portfolio implications of my new research into three directives". Here are directives #1 and #3.(Number two is about international investing.) Read page 13 too.

"Dividends: Buy stocks that have sustainable cash flows and return these cash flows to the shareholders as dividends."

"Valuation: Accumulate shares in firms with reasonable valuations relative to their expected growth and avoid IPOs, hot stocks or other firms or industries that the consensus believes are the 'must have' investments."

Further to the latter directive which is developed in Siegel's Chapter 3 and summarized, along with some other ideas, in Chapter 5:
"Lesson One: Valuations are Critical"
"the best performing stocks over the past fifty years had much higher earnings growth than the average stock, but their valuation ratios were only slightly higher than the market's" 75 Or, put another way: "If you pay too high a price for your stock, your returns will be disappointing" 16
"The average P/E ratio of the stock market has been only 17 over the last forty-five years."

I could fill a couple of typed pages with the quotations about dividend stocks I have marked in The Future for Investors. Here are a few of them.
"The payment of dividends has provided management with...discipline throughout most of the stocks market's history, and I believe that stocks that pay good dividends will yield superior returns in the future." 242
"how did a firm signal that its earnings were real? The old-fashioned way, by paying dividends-an action that gave tangible evidence of the firm's profitability and proof that the firm's earnings were authentic." 134

Which companies were the winners?
You'd never guess which companies appeared on the dividend lists most often over the years as high-yielding winners. 242 The reason why these companies are in the superior returns list is developed throughout The Future for Investors. It has a lot to do with expectations. (Refer to pages 41, 42, 35, 9 and 244)
BUY-AND-NEVER-SELL
"By following this buy-and-never-sell approach [with the original S&P 500 in 1957], investors would have outperformed almost all mutual funds and money managers over the last half century." 13
IPOs
"The long-run performance of initial public offerings is dreadful." 14