The Dividend Cafe - Profit from the Profit Part 1

Episode Date: August 21, 2026

Today's Post - https://bahnsen.co/4cNKVg3 David Bahnsen hosts the Friday Dividend Cafe from Southern California and previews his new book, Profit from the Profit, releasing Tuesday, explaining it reflects the same message he has shared weekly since starting the commentary during the September 2008 financial crisis and later branding it Dividend Cafe in 2015. He outlines an investment philosophy focused on connecting client outcomes to real business profits and prioritizing what companies do over market sentiment, arguing dividend growth investing seeks sustainable returns from company cash flows and dividends rather than relying on investor psychology. Bahnsen explains why he discusses macro headlines even though he avoids frequent portfolio changes, emphasizing a bottom-up approach intended to be insulated from news. He recounts learning these lessons after the dot-com bust and highlights dividend growth’s withdrawal and accumulation benefits, with upcoming book topics including taxes, volatility, and how investors should profit from profits via durable dividends. 00:00 Welcome and Book Launch 01:04 How Dividend Cafe Began 03:03 Core Philosophy of Profits 06:12 Sentiment Versus Fundamentals 09:22 News Commentary Without Trading 11:59 Personal Journey to Dividends 15:13 Key Themes From the New Book 17:01 Closing Thanks and Commitment Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividing Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Hello and welcome to the Friday Dividend Cafe. I am your host, David Bonson. I am very excited to be with you. I'm back in beautiful Southern California for a week. And I also am excited because my brand new book, Profit from the Prophet, the Past, Present and Future, Dividend Growth, investing comes out this coming Tuesday and it's always exciting when you've poured a lot of work into a book to see it come to fruition. But that's not really relevant to what I'm excited about in the Dividend Cafe. I right now am excited because I truly believe that the message of this book is the message in one way or the other that I am after every single week here in the Dividendon Cafe. I recognize that some of you are newer subscribers, whether it's to the video or podcast or the

written commentary that I do. And so I want to rehash some history that many of you have heard before, so bear with me. I'm going to do it quickly. But, you know, this was born out of the financial crisis in September 2008, the very week in which Lehman and AIG and Merrill went down and my then employer was on the brink itself, Morgan Stanley, and I began doing this commentary out of that moment and then just sort of never stopped. And so we did a kind of email blast weekly commentary every Friday all the way until we left Morgan Stanley and planted our flag as the Bonson Group under the ecosystem of High Tower Advisors at the beginning of 2015. And at that point, We branded this as Dividend Cafe.

We created a website to incubate it. We actually did the subscribe, unsubscribe function, and we eventually added a podcast not too long thereafter, and a video and other things like that. But it was going on for years before then, basically to clients, and then just organically we would get people that would hear about it and request to be added to the email list.

And we did that. And of course, now it's really grown into something substantially bigger than I ever expected. And the burden of doing it every week has become the blessing of doing it every week. It is a labor-intensive endeavor, but it's one I truly love. And I am just very grateful. It's become a huge part of my entire adult life. But when I say the message of the book and profit from the profits message about dividend growth investing, you might think, well, Dividend Cafe is going into sometimes what happened that week and what we think of the new Fed chair and election commentary and macroeconomic analysis and all that type of stuff. And that's very

true, but it is still all going for the same thing, which is an investment philosophy adhered to and then an investment philosophy applied or executed. And dividend and growth investing essentially represents the application of an investment philosophy. And that philosophy can best be summarized succinctly here right now. I want to kind of restate it this way. I basically believe that there are individuals that we have, if I do share responsibility to, that are coming to us looking for advice, looking for some financial tools or instrumentation that will produce goals. and outcomes, successful achievement of goals and outcomes for them. And the financial instrumentation we're using is very consciously connected to the productive endeavors of mankind. And that a company

can produce goods or services for others. Others want the good or service. They can produce it for less than what they can sell it for, thereby achieving what we refer to as a profit. And then the companies that generate that profit in sharing some of that profit with the risk-taking investors that invested in the company, they reward the investors for the risk they took. And in and of itself, making a product at a cost that is less than what you can sell it for, and finding people who like it and buy it and thereby generating a profit, that could be a lemonade stand

that doesn't represent a very investable business. But this basic concept of creating value for others out of human endeavor and then achieving something called profits from that when it is done at scale, when it is done at size, when it is done with various strategic

and competitive and market advantages that can become sustainable, It represents something that becomes investable for those of us who are trying to create solutions and outcomes, achieve goals for real life people and institutions and families and so forth. So there is this underlying philosophy, and then there are a number of ways that people can get there. And one of the things that I believe is that many people don't know how their outcomes come about. I also think they sometimes don't feel like they need to. Stock prices go higher and index went higher. They can say the market went up and now I can retire.

The market went up and I can pay for my kids' college. The market went up. The S&P went up and now I'm buying a new boat or whatever the case may be. Other times people might think that there's just this relationship between other assets and there's mispriced and we exploited that mispricing. and it can get very, very complex with kind of relative arbitrage opportunities and whatnot. And all of these things can deliver unsuccessful results, but they can deliver successful results. But my point, particularly more in the camp of when we refer to an index going up, is that it is depersonifying, de-personalizing, and really understating what is actually taking place.

and you can say, well, it's kind of harmless. The investor doesn't care how it's happening as long as it is happening. But that isn't true because it puts the investment focus on exogenous factors that are outside of the investment advisors control and the investors control. It largely puts a focus on this sort of abstract, esoteric idea of a market going up when in reality what they're asking for is the sentiment to go up. We want the investor psychology to go up. My investment did well because other people thought it would do well.

Other people were so excited about it doing well in the future that they bid the price up. And that can work quite a bit. There's times when it cannot work and those things could actually be quite disastrous. But my point is that embedded in any exogenous hope of investor sentiment, this outside circumstances driving, is there has to be this. and dogenous process by which there's actually the business itself doing better. That focus to me is extremely important that I want our clients to not be reliant on us capturing the sentiment of the masses or being right about the sentiment or about the masses just constantly cooperating,

always being in the right mood to push our investment prices higher when we need them to. But that endogenous focus, and again, I recognize this exogenous, endogenous terminology is wonky. But I'll dumb it down because I think it's important to you understand exactly what I'm saying. It's a focus on what the company is doing versus a focus on what the masses think about what the company is doing. And there is a lot more volatility and up and down uncertainty around sensuality. intimate in psychology, then there is underlying company performance. Now, companies can perform poorly.

They can fail to execute. They can fail to deliver on something. That happens. The bandwidth of that is much more narrow than the bandwidth of investor psychology. And so that by us in the dividend growth world being consciously connected to trying to extract a risk premium, extract a positive outcome from what companies are actually doing, And we're getting our profitability that we achieve as investors from the profitability of the company and them sharing it with us in the form of dividend versus this constant hope and sentiment and the masses and the psychology, etc. I think that what you see is a far more sustainable, reliable, durable process.

So that is, of course, at the heart of what we believe and in the heart of what I'm arguing in profit from the profit. But really, when there's a new Fed chair, when there's a new election coming, when there's a new tax bill we're looking at, when I look at the various macroeconomic things that I write about week by week by week, it's always being done through the lens of dividend growth investing. And I will tell you, I get quite a bit of mail from people that say, hey, I read Divida Cafe today. I thought your commentary on XYZ was great, but I'm just curious, what did you do in the portfolio about it this week? And I think it's a perfectly fair question. And I have some critics to say, because you are not trying to change the portfolio day by day to what's happening in the news, why are you right about it each week? And I also think that's a very fair question, although I candidly think I have a very good answer.

But the reality is that one of the beauties of dividend growth investing is, yes, there are things that may happen within a company that we say, hey, this company now has a great recurring cash flow that makes it a wonderful prospect for a dividend grower. or this company is run into something that we feel their ability to continue paying and growing a dividend is now called into question. There are these bottom-up things we have to wonder about. But I can't really think of a situation where the top-down, like who the chair of the Fed is might impact whether or not a Procter & Gamble or McDonald's, for example, is and grow the dividend. I do not think that you want your portfolio and the outcomes you can. get from your portfolio highly subjected to various news issues like that. I am highly skeptical

that people making adjustments in their portfolio when it's managed on a bottom up basis around those types of headline events are going to do so well. What I think, though, is that having a good framework of what's happening in the world, to the extent it affects the asset allocation of a portfolio, to the extent by being aware of what's happening and hearing our point of view on it, we want you to have greater confidence in our command of what is happening, you to have a greater confidence in the strategy that underlies your portfolio, while at the same time the strategy itself is meant to be far more insulated from the events of the headlines. And I think that dividend growth investing all at once allows an investor to have the right mentality about their investments and those investments being instruments to achieving financial goals.

Biographically, I've shared many times. I encountered dividend and growth investing as a younger man coming out of the late 90s and early 2000s and the dot-com implosion and what took place in the 30-month bear market that was March 2000 to September 20th. 2002, that I realized, A, there's a whole lot of people on my profession and a whole lot of clients out there who want that excess, that greed, that leverage, that euphoria, and that those things can rip someone's face off that can, first of all, kill the careers of advisors and more importantly and more unfortunately become fatal to the goals and outcomes of individual investors. But secondly, even apart from that leverage excess euphoria dynamic that I learned at very early age as a professional investor was not going to be a part of my life and career and the way in which I did business. I also learned that conventional mechanisms that were supposedly far more prudent had at least the chance of failing in their delivery.

of outcomes. I don't mean, oh, they have a chance of going down. Everything can go down. I'm not referring to volatility. I'm referring to goals that could not be achieved because of negative compounding, because of sequence of return risk, because of real life financial dynamics that admittedly don't happen a lot and have not happened frequently since, but did happen then and have happened in history multiple times. And so I went in pursuit of a strategy that could sustain withdrawals for people. And I believe to this day with every ounce of breath in my body that when you're taking fruit from the tree but not having to cut down the tree itself, that the up and down value of the tree becomes immaterial to a drawer. And as long as you're only taking from that fruit,

you are insulated from these various risks that undermines so. so many people, 25 plus years ago. But I was in pursuit of a withdrawal strategy and I stayed for the accumulation strategy. I quickly learned the unbelievable math of compounding the reality that in a lost decade for index investors, the dividend growth did very, very well, that there was a underlying durability of the types of companies, their own ability to make. manage cash flow to enter into a social contract with their investors that was far more shareholder friendly than so much of what was happening then and so much of what is still happening today. And so the accumulation benefits then became coupled to the withdrawal benefits in a very

practical and material way in our own practice. And then that has guided us for over two decades since. I have a lot more I want to say about Dimm Growth Investing, but I say it all the time in Diving Cafe, but with the book coming out, next week I'll wrap this little two-part series up by getting into a couple of the messages in the book as to why I think the tax aspect of dividend growth investing is a feature, not a bug, how I believe that dividend growth does not just defend against market volatility, but embraces it and exploits it offensively, that there is something it does to capitalize on it compared to other investment strategies. but ultimately I really just want to talk about the nature of dividend growth investing relative to other public equity options,

which is what a company is supposed to do with profits. And I want to make the argument for investors profiting from the profits and doing so in the form of sustainable, real, durable dividends that they can put either into the reinvestment or more shares of the company or, into their checking account to purchase those boats, groceries, tuition bills, or dinners out that make life meaningful. Thanks so much for listening each week to the Diving Cafe. For those that you've been reading this for 18 years, I know you've heard a lot of this before. I hope that this book captures my convictions more eloquently than the first book. I'm proud of the first book. I wrote a book in 2018 that came out in early 19 called The Case for Diven Growth Investing. And profit from the profit's a brand new book, but it's meant to be updated. It's meant to tackle some new arguments, new critics, new critiques.

And I think it does it better than what I've written before, but I'll leave that up to those who read the book or listen to the book, both the audio and the written book come out on Tuesday. But I will say this. Every week in Dibbing Cafe, I am committed to two things. one is a faithful consistency around first principles. So there is a belief system that's going to drive how I'm dealing with various issues, whether they be socioeconomic, macroeconomic, socio-political, or just headline issues in the news that warrant commentary.

But I also think that the execution, the application of these things, I'm committed to it being consistent out of those principles. And I think that dividend and growth investing remains something we're, passionate about because of that consistency. And I believe that my arguments for it as an investment strategy rooted to investment philosophy have been significantly fortified by the last, let's call it, 25 years. And I look forward to not only those who read or see the book and hear all the message there, but I look forward to continuing to do it for the rest of my life here in the Dividy Cafe. With that said, thank you. Those of you who listen, those of you who listen, those of you who

who watch and those of you who read, thank you for your being a part of this, Dividy Cafe. I look forward to being with you next week. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC.

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