The importance of investment moats

IT CAN be quite tempting sometimes to think of the dividends that we receive from our investments as some kind of trinket from the company. It is especially tempting to be dismissive about dividends; when our finances get a little stretched, we simply spend those dividends instead of reinvesting them.

This is because once those dividends disappear into our bank accounts with the rest of our income, then there is a good chance that they will just get used. We are not alone if we are guilty of doing this. It is a very easy trap to fall into.

But here is something that we should think about. Once we understand it, we are unlikely to be as cavalier with our dividends ever again. That something is called total shareholder return. It is probably one of the least-understood aspects of investing, even though it is vitally important.