1 August 2026, Freewriters Community Daily Writing Prompt Day 3182: dividend

“OK, but Pop-Pop: it still don't make no sense. You didn't become a billionaire on dividends.”

“Yes, Vertran, but, everybody doesn't have me as a grandfather to explain that. A dividend is good passive income for those who do not have the time to make a bunch of businesses work.”

“But, Pop-Pop, it still don't make no sense.”

Mrs. Velma Stepforth smiled as 66-year-old Thomas Stepforth Sr. and their nine-year-old grandson Vertran Stepforth continued their explorations of Investopedia while the grandson sat leaning against his grandfather on the couch.

“Because, Pop-Pop, stock goes up and down, so how do you know the dividend is going to pay enough to make up for stock going up and down?” Vertran said.

“First, Vertran, most people do not know stocks go down,” Mr. Stepforth said. “Most retail investors do not account for that, so if they buy dividend stocks, they think the stocks are going up and the dividend is the bonus. In reality, unless you pick your stocks and really your businesses carefully, you can lose much of your investment and the businesses can slash their dividends, too.”

“Wait,” Vertran said. “Grown people don't know about gravity and that stuff bounces?”

Mr. Stepforth smiled.

“They don't know it applies to their investments,” he said.

Vertran considered this, and then shook his head.

“So, uh, where are they getting the anti-gravity machine – Cousin Milton and his friend George (both fellow nine-year-olds to Vertran) haven't been able to convince Grayson (George's six year old brother) to even give up enough Legos to build them a rocket, because even Grayson knows that if you throw a Lego in the air, it's coming right back down.”

Mr. Stepforth's smile got even bigger.

“Hadn't considered it from George, Milton, and Grayson's engineering perspective,” he said, “but there's an even bigger problem.”

“What?”

“In order to believe that physics don't apply to you, and also the associated mathematics – actually, first, let's look that up, because it is called 'reversion to the mean' in investing and statistics.”

So grandfather and grandson looked up reversion to the mean, and Vertran said, “Oh … so, the average price has the gravity in the market.”

“Yes, and this is why it is hard for a price to stay too high or too low if the asset is stable in what it does and in the mass opinion about it,” Mr. Stepforth said. “If it goes down, but people still think it has worth, buyers will come in and buy and bring the price back up. If it goes way up, people who want their profits will sell it, so, the price will come back down. It does look like a bouncing ball at times, either hitting the floor or hitting the ceiling. Now, there's a lot to be said about values and stability that we won't do today. What I want you to know is that gravity and reversion to the mean are both real things.”

“OK,” Vertran said.

“In order for people to not believe real laws cover them,” Mr. Stepforth said, “they have to forget that they aren't Jesus, and that they can't actually walk on water. That's the problem I see, as an old man who doesn't know much about Lego engineering.”

“OK, but, if you can't walk on water, don't you find out as soon as you try?” Vertran said.

“Yes, and if you don't understand reversion to the mean among other things, you buy high and sell low until your bank account is empty,” Mr. Stepforth said. “Happens every day.”

“OK, so let's back up,” Vertran said. “It's not even about the dividend. If you don't know what you are doing … investing in the stock market when you don't know what you are doing ... it don't make no sense.”

“And that's what I wanted you to see, Vertran. None of it works if you don't know what you are doing … but all of it can be made to work under nearly all conditions if you know what you are doing and know what you are doing for you. For us, we like to build businesses, and, if that's what you are best at, that's what is going to work for you. Dividends are right for people who do not have the time or the talent we have, but can pick good companies and can afford to park money in them over the expected up and down.”

“Oh … so, it's what kind of investor are you, more than what the investment is.”

“Right. To us, we don't like to sit around and we don't like to sit money around – dividend stocks don't work for us.”

“OK, I get it now! It makes sense, but we don't have to do it.”

“And, wise investors know 95 percent of investing is understanding what makes sense and what doesn't make sense for them,” Mr. Stepforth said.

“It seems to me that maybe Grayson is onto something,” Vertran said, “because he knows Milton and George are going to revert to the mean and get grounded, so that's not a good investment for his Legos.”

“The gravity of the ground,” Mr. Stepforth said, his smile blossoming at last to a grin, “is indeed very strong.”