Should I Buy Stocks Because of Their High Dividend Yield?

Then joined by Ben Madden from Allied Cleaning Services

Table of Contents

• Introduction
• Discussion on High Dividend Yield Stocks
• Impact of Company Earnings on Dividends
• Investment Strategies Beyond High Dividend Stocks
• Considering Long-Term Financial Goals
• Interview with Ben Madden from Allied Cleaning Services
• About the Business
• Company Evolution
• Traditional Methods in Window Cleaning
• Benefits of Power Washing Service
• Employee Management and Business Operations
• Impact of Digital Marketing and Referrals
• Future Plans and Business Legacy
• Contact Information

Introduction

Madison: Hello, everyone, and welcome to Not Just Numbers, Honest Conversations with a Financial Advisor and Lawyer. I am Madison Demora, and I am here with Mike Garry. Mike is a financial advisor and the CFP and the founder and the CEO of Yardley Wealth Management. He is also an estate planning lawyer and his law firm is Yardley Estate Planning. Hi, Mike.

Mike: Hey, Maddie. How are you?

Madison: I’m good, I’m good. How are you doing today?

Mike: I’m good.

Madison: Good. So today we are going to discuss Should I Buy Stocks Because of Their High Dividend Yield? So I will read a little snippet and then ask you some questions, and we’ll go from there.

Mike: Sounds like a plan.

Madison: All right. Many investors are attracted to stocks that pay high dividends because they offer a steady income stream. However, it’s important to approach these investments with caution. High dividend yields can sometimes result from a significant drop in stock price, and during economic downturns, companies may reduce their dividend payments. Additionally, focusing solely on dividend yields can cause investors to miss out on companies with strong share appreciation that don’t pay dividends. It’s crucial to be aware of these potential drawbacks and to consider broader investment strategies.

Mike: That’s a great synopsis. I wonder if you have any actual questions for me.

Discussion on High Dividend Yield Stocks

Madison: Okay. All right. Why might a stock have a high dividend yield, and what are the potential risks associated with this?

Mike: Okay, so stocks might have high dividend yields for any number of reasons. First, it could be that the company is really profitable and its board of directors and management want to pay a high dividend yield to reward shareholders or to entice new shareholders. So it could be part of an overall strategy. And it’s done in some sectors of the economy, like utilities and energy, companies have traditionally paid high dividend yields. It also could be a high dividend yield because the stock hasn’t been doing well recently. So if you have a stock that’s $100 a share and it pays out a $2 dividend, it’s kind of a normal dividend, a little bit more than the S&P500, but nothing great. And, say the stock gets pummeled, and all of a sudden it’s worth half as much as it was worth a month ago, and it’s $50, and the quarter hasn’t come up yet, and so the dividend still looks like it’s going to be $2. So maybe all of a sudden it’s a 4% dividend. You’re like, oh, that’s three times what the S&P is paying, maybe that’s a really high dividend. The thing is, you can’t just look to see what the yield is and decide to buy something. You need to find out, like, why is that stock paying a high dividend? You know, it’s a big question.

Impact of Company Earnings on Dividends

Madison: So how do changes and companies earnings influence its ability to maintain or adjust dividend payouts?

Mike: Sure. So they could impact them a lot. So if a company has long, steady earnings growth and has a hiccup for a quarter or a year, they could probably still continue to pay their dividend. And I know there are some companies that make it part of what they do, is they pay an increasing dividend every year or every couple of years. And there are a handful of companies that have been successful doing that. But more often, companies that pay out a generous dividend sometimes don’t leave enough cash on hand. And if they have earnings difficulties, either because of missteps they’ve made or changes in the market, or just because the economy has gotten bad, they might not have the resources to continue paying the same or higher dividend, and it could really disrupt them. So I think it’s a hard thing to figure out. First, you need to know if the company has that long term history of doing that, and then you need to, I guess, hope that they’ll continue doing that. But you don’t really know. I mean, I’m sure there are scores of companies that paid out dividends for 25 or 50 years, fall in hard times and go away. We look at the companies that were in the Dow Jones 20 years or 50 years or 75 years ago. So many of them don’t exist anymore. At one time, they were the strongest companies in the world, and they’re just gone. So it’s a big risk there.

Investment Strategies Beyond High Dividend Stocks

Madison: Yeah. So why might some investors choose not to focus on high dividend yield stocks and what are alternative they can employ?

Mike: Sure. So one of the great reason for not just investing in dividend stocks is because a lot of the highest returning stocks don’t pay dividends. Most technology companies don’t pay dividends in their 1st 10, 20, 30 years of existence, during which they have had remarkable returns. Berkshire Hathaway has had a phenomenal return for 60 years and doesn’t pay dividend. And so if you just stick with high dividend paying stocks, you have missed out on the stocks that certainly have returned the most the last 10 or 15 years. And yeah, It’s a big flaw in this strategy. So, you just buy stocks with high dividends, you ignore big parts of the market that have had really good returns.

Considering Long-Term Financial Goals

Madison: Yeah. How should investors consider their long term financial goals when deciding whether to invest in high dividend yield stocks?

Mike: Before investors invest in anything, they should figure out what their long term goals are and what they’re trying to get from their investments. And maybe some high dividend yield stocks can be a part of it. We generally prefer a globally diversified portfolio that’s not based on whether stocks pay a high dividend or not, but based on other things. And so, but I know that people do sometimes pursue that high dividend yield paying strategy, and I think sometimes it works for some people’s goals. It’s not one that we employ.

Interview with Ben Madden from Allied Cleaning Services

Madison: We are joined here today with Ben Madden, the owner of Allied Cleaning Services. Ben, how are you doing today?

Ben: I’m doing great. How about you?

Madison: Good. Good. Thanks for joining us today. So, Ben, would you like to explain to our listeners what your business is, what you do for a living? A little background?

About the Business

Ben: Yeah, sure. I’m the owner of Allied Cleaning Services, a local business in Yardley. It was founded by my father, 43 years ago, and he’s been retired for about nine years now. So I’ve taken over. I’ve been an owner for 20 years of it, with partners with him for it for 20 years, and then he retired about nine years ago, and I took over things. So we clean residentially and commercially. We do windows, floors, carpets and power washing. So, like, you think about us, like, the stuff that, like, the maids or the housekeepers don’t do that kind of work, is what we do.

Madison: Nice. Very nice. So have you always worked in the company, even when you weren’t an owner?

Ben: So, no. There was a point in time where I thought that I wanted to.. I always knew that I wanted to own my own business. So there was a point in time where I thought that I wanted to do restaurant work. So I worked in the restaurant business part time when I was like, 16 to 18. And then when I really thought, all right, I got to dive into this and really figure it out. I did stop working for Allied cleaning for two years and realized that I wanted no parts of that business at all. It kind of chewed me up and spit me out a little bit. It was a great time and a great learning experience, but it just, it wasn’t for me. It let me know where I was supposed to be. So that was good.

Mike: Well, that’s great. That’s a great story.

Ben: Yeah. So then when I was coming back as well, so I was going to start a carpet cleaning business, because I was doing that on the side for a local carpet business. And so I had the money for that. And I felt like, from working in window cleaning and power washing with my dad, I had the wherewithal to do carpet cleaning and, you know, kind of use the same business model he was for windows. So this was when I was 22 years old, and he, thank God, before I went and started this, came to me and said, hey, just so you know, carpet cleaning is a dying business, if you’re going to do it, you have to get into the hard floors as well and you might as well team up with me, because I already have, like, some window customers and power washing. His business was winding down at that time, but because he was just running it with one other guy, and I was doing the restaurant thing. And so, you know, it was easy for us to ramp that back up again and kind of call his old customer list and get going again with that kind of thing. And we added carpet cleaning and more floor care than he had before. He had always refinished a VCT tile floor. No one knows what that is. So if you think, like, the floors in the doctor’s offices, those hard floors that need to be refinished, and, like, cafeteria floors in schools and the supermarkets, a lot of that’s VCT tile.

Mike: Okay.

Company Evolution

Madison: Very nice. How has the company evolved since it was started by your father? I think you said 43 years ago, right?

Ben: Oh, yeah. Well, it’s had many changes throughout. It’s been very flexible throughout different economies and pandemics and things like that. So, you know, it’s had to change around numerous times. But primarily, we’ve always been a window cleaning company. That’s always been a service that we’ve offered and power washing as well in the VCT tile. That’s how it was founded. And then, so we added stuff like when people are moving in and out, we don’t do maid service stuff, but when people are moving in and out or really need a deep clean, we do things like ceiling to floor. So we’ll come in, we’ll hit all the ceiling fans, do the windows, power wash the house, scrub the walls, the baseboards, do a deep clean on the kitchens and bathrooms, carpets. Like literally everything that you could, if you wanted it, we could do it all. Right. So we started doing that a lot in the 08 when the houses were.. When you really had to take care of your house to sell it around 08 when they had the housing crash. So that was a way that we pivoted when we had to, and we kind of kept those services along. So we still do that stuff. And it’s really been helpful to keep us busy throughout the winter when window cleaning is not really happening.

Mike: Right. Can I go back to your dad say carpet is a dying business? Like, did it used to be a bigger thing?

Ben: 100%. Yes. Yes. I have some knowledge of the.. My carpet cleaning business and some of the other local carpet cleaning businesses, and they’ve all had to pivot to doing hardwood floors. And really, the bigger carpet cleaning businesses are focusing on grout cleaning. Because you can use those same kind of trucks and stuff. You gotta get a couple more things, but you already have the main ingredients for it with the carpet cleaning. Carpet cleaning is never gonna die, but it’s not as popular. People have less and less carpet in there house. That was something that my dad really saw early. I think he saw that earlier than other guys, and that was good for us.

Mike: So it’s funny that I didn’t even think about that. But, yes, in our old house, we had the carpets clean. The kids were little, and the house we bought had, like, beige rugs and paid somebody to clean those carpets, and it was amazing, the difference. But that’s more than 20 years ago, and, you know, I haven’t had it done since then. We don’t. We don’t have any wall to wall carpets in our house now.

Ben: Exactly. Yeah. That’s a lot of people, they don’t have any wall to wall carpets in their house. It’s normal now. Most people, if they have carpet, it’s in their bedroom at this point, really. I’m one of the last holdouts. I got carpet in my living room because when I bought my house and remodeled, it was the last thing that I didn’t have money for either. And fortunately, I keep it looking good because I can clean it when I want. So, you know, it’s one of, you know, my wife’s asked for a lot of new things, but the carpet is not one of them yet. She will eventually, you know.

Madison: Yeah. It’s so weird. I never would have thought that carpet cleaning and grout would be hand in hand. Like, as far as the products and the equipment for it, I never knew that.

Ben: So. So I don’t clean grout.

Madison: Yeah.

Ben: I’ve never had success with it. And I have a great partner that’s also a Yardley business. It’s called Marty’s Carpet Cleaning. They’re pretty popular around here, too. I refer him all the grout, and he gets me window and power washing jobs. It really works out for both of us. And he’s so much better at it than I’ll ever be that I can’t even, I’m not going to bother, you know.

Madison: Yeah, absolutely. So, are there traditional methods from your father you still use in window cleaning services, and are they still effective?

Traditional Methods in Window Cleaning

Ben: So window cleaning has barely changed, except for they have these water fed poles now for the outside, but the preparation for cleaning them is exactly the same. Like before, we use that water machine outside. It’s exactly the same way that my grandfather taught me and because he owned a different business prior to this one, that was just a window cleaning business in Levittown, it was just commercial. When Levittown was just built, actually, he moved from New York to Levittown to start that business, that my uncle took over. So anyway, yeah, so we’re literally using the same prep methods with better equipment, thank God, then you know that my grandfather taught us. And the window cleaning on the inside of a house is exactly the same.

Madison: Wow, very interesting.

Ben: Yeah, that hasn’t changed.

Benefits of Power Washing Service

Madison: Can you explain the benefits of your power washing service, and how it complements the window cleaning offering?

Ben: All right, yes, that’s a great question. So for me, especially, like, for the money, the transformation that you can do. So, first of all, if you power wash your house, the outside of your windows are going to get dirty. There’s no, that’s going to happen. Right. So you might want to get that cleaned anyway. And it’s nice that we offer both of those services so that you can hire one company. For me, the biggest transformation that you can do on your house, bang for your buck, is to get your house power washed and your windows cleaned at the same time. So, like, your average house in Lower Makefield that’s in a neighborhood, and these really vary depending on your windows, but your average house for power washing is $500, and so is your window cleaning. For $1,000 there’s nothing that you can do to make your house look that much different. Like that I almost guarantee. Like, when you, if you got some dirt on your house and some dirt on your windows for that price, if you’re, you know, you’re not going to change your kitchen out for that. You’re not going to even get anything painted on the outside of your house for that. You know, there’s not a lot of home improvements that you can do for that kind of money that have that much of a change. And for our power washing, we’re very careful with that. Mike, we did your house, so you saw us out there. We don’t actually power wash the house with like, just brute force. And we don’t do like a chemical spray everywhere like a lot of the other companies do. What we do is we get the house wet with our power washer, and then we dip brushes and chemical, and we just run that along the house so that we’re not pounding on the siding. And then we, when we’re done brushing it down, we rinse it off. And that chemical, really, it doesn’t even kill a blade of grass. And it really gets more stuff off than power washing would anyway. Power washing gets the green mold off, but what no one sees behind that is there’s black mold. And that doesn’t come off from power washing. You need some kind of chemical agitation for that.

Mike: Yeah. So that was a good time to point out, as Ben said, I met Ben when he did our house. I was looking on the Facebook page, “Lower Makefield is a Great Place to Live” and Ben got a lot of people recommended him and he did a great job. It was really pretty cool. He showed me, like, the before and after in some spots because I was working from home the day they were there, and, uh, yeah, I couldn’t recommend them more highly. You know, they came out exactly when he said he would. Everything was neat and tidy before and after. Place looks great. One thing I didn’t realize was I should have got my windows done. So I will text you after schedule time for that, because that was the first thing that my wife said is like, oh, my God, look at the windows. And so I cleaned some of them outside, but we’ll have to get that done.

Ben: That’s my fault. I usually try to recommend that, but I remember when we met that it was late in the day and you were just asking about the power washing. And I was also, I thought you wanted me to get you in the schedule a little quicker so that that helped you get in a week earlier than you would have if you were getting the two of them done.

Mike: Yeah, and I think we had to do that cause we had a vacation, like the week after. So.

Ben: Yeah, I remember there was some, something to do with your schedule that you wanted to get done before a date. That’s usually the case with most people. We try to try to accommodate that. It’s hard at times, but we do the best we can.

Mike: Yeah. And we’ll figure that out. And I don’t, it doesn’t seem like the doing the windows will in any way hurt the power washing that was done.

Ben: No, no, that’s, that’s a good. No. Power washing will only mess up the windows. Pretty much everything else that we do, you can’t really tell that we’re there. It’s like when we clean the windows, we shouldn’t have to clean your, you know, shouldn’t be like, oh, look at my carpet or look at my siding or whatever. You know what I mean, after that. The outside of windows for power washing, there’s just no way around it. We even try to rinse the windows down, but it’s just there’s dirt on the siding and there’s dirt on the windows. And really just like, if we do our windows, we do a lot of prep work for it before we even start to clean it. So if windows are dirty, they’re not coming clean with just water, basically. That’s not going to happen.

Mike: Gotcha. Alright.

Employee Management and Business Operations

Madison: So how many people do you have that work for you?

Ben: Okay, so we have four full time, and we have about six part time workers. Because we do a lot of weekend stuff, so we have people that work full time, and then they come and work part time for us. And then we have some people that work for us. We do some commercial office cleaning at night, so we have some people that do that for us as well.

Madison: Very nice. So how do you balance the hands on approach, you know, going to these houses and these businesses and, you know, doing what you do, but also managing the business as a whole?

Ben: Well, for a lot of the paperwork and book work, my wife really gives me a hand with that. She’s great with it. She does all that stuff. She does the payroll. Anything that has to do with a paperwork or payroll or anything, I can just ask her to do it. And if she’s not already capable of it, she can figure it out and do it. So that’s great for me. I can get, if she’s home, I can get an estimate to someone in 2 seconds because I can just text her the name, the address, the price right there, and then she can send it out real quick. And if customers are asking about invoices, I can just call her. I know where she is most of the time, so it’s great. Sometimes she has to work after hours. You know, what can you do?

Madison: Yeah. That’s awesome. Very, very nice. So I just want to clarify. I think I saw this on your website. You guys won the Angie’s list super service award.

Ben: Yeah, we’ve won that a bunch of times.

Impact of Digital Marketing and Referrals

Madison: Okay, so how has that impacted your business?

Ben: It used to be a great source of business for us. They changed their business model to where necessarily the people that… It’s not about referrals on there anymore as much as it is about if you paid to be seen. It used to be great for us, Angie’s list, because it was a referral service. So the new referral service for me is the lower, it’s not just that, but pages like the “Lower Makefield is a Great Place To Live”, Newtown Township. And you can’t self promote on these pages, which is why Angie’s list was so good for me to begin with. It wasn’t self promotion. It was other people referring me, and I just got qualified leads from them. It was great. All I had to do was a good job and show up on time. That’s, like, my main business model for getting more businesses. I just try to do a good job and show up on time, and then people talk about you. So I guess Angie’s List was great for it then. And now Facebook and groups and other things, there’s other people talking about us that are more effective for us now. Again, I can’t control those things at all, but they’re great resources. And like I said, when so many people are talking about you in the community, you feel like you won another Angie’s list award anyway, you know, and sometimes you can win those awards. Like, if enough people refer me, I will win another Angie’s List award, but I won’t get any work from it. I don’t know if that makes sense to you, you know, because the people that are going on Angie’s list, I might get a lot of people saying, you’re doing a good job on Angie’s list, but there’s not people that can see me on Angie’s list unless they’re looking specifically for me on Angie’s list.

Mike: Right.

Ben: So, yeah, the digital marketing, as you guys know, changes from time to time, and you got to figure out and follow where it’s going.

Mike: Yep.

Ben: That’s confusing. That’s confusing for a guy like me to navigate. I’m really good at, like, window cleaning and, you know, power washing. That’s my lane. And so that’s where I do struggle as a business owner.

Madison: I feel like. I mean, it’s a small town, and I feel like referrals between people are so important here. You know what I mean?

Ben: Absolutely.

Madison: All the small businesses here, I feel like everyone tries to support everyone, and, you know, you do a good job at Mike’s house, and he tells his neighbor, hey, Ben from Allied Cleaning did a great job. It’s like, the best marketing, I think.

Ben: Yeah. That’s how we survived, literally. Great for us.

Future Plans and Business Legacy

Madison: That’s perfect. So, how do you plan to continue the legacy and traditions of Allied Cleaning services for future generations?

Ben: Okay, so it’s a good question. We are actually able to retain employees, which is hard to do in this business. So I have a guy that next year will be his 20th year with Allied. He can go do anything that I can do on a job site, basically, no problem. It makes it so that we can get more work done. He can run people and things like that. And just recently, because, you know, we’re both getting a little bit older. We both turned 40 a couple years ago. We started talking about, hey, we need more guys like this for when we’re tired. And we have, we picked two of my other full time guys. One guy’s going out and doing work on his own now, not all the time, but he’s been great. There’s been no complaints. I’ve actually gone and checked his work and stuff like that. And on commercial jobs, we’ve let him go for six months. He’s been great. Like, he can do whatever on a commercial job. So probably in another year, residentially, he’ll have his own truck, and, you know, we’ll try to keep that going. We’re not in a rush to get big because we realized that the quality is, like, why people are calling us. That has been the toughest thing to maintain since we wanted to do this and we’ve gotten a little bit bigger, is, like, we have to say no to some things where we’re just booked out until this time. Like, because, you know, you can only do so many things well in a day. So that’s what we focus on for now, and we’ll grow slow. Things are going good for me. I got nothing to complain about. So if we don’t have six trucks next year and we have four instead of three, that’s fine, you know?

Mike: Yep. That sounds great.

Madison: Quality over quantity, right?

Ben: Yeah.

Contact Information

Madison: Awesome. All right, Ben, so where can listeners find more information about you and your services?

Ben: Okay. Our Facebook page is a good one. And that’s just Allied Cleaning on Facebook. And then our website, alliedcleaning.com.

Madison: Perfect.

Ben: Yeah, that’s the best. And then if anybody wants to talk to me, they can call me at 215-493-0759.

Mike: Okay, that’s great.

Ben: All right, thanks so much.

Madison: This was great, Ben. Thank you for everything.

Mike: Thanks Ben.

Ben: Yeah, no, thanks for your guys time. Thanks for having me. I appreciate it.