What does Dividend Payment Signal to an Investor?

I guess most investors will generally focus on earning announcement of a company i.e. how much profit its makes this quarter, how much is the revenue or profit growth etc, 

There is nothing wrong to focus on quarterly earning announcement, earnings are important but it has to be a quality earning, not some accounting earnings that may not translate into real strength of a company. But I opined that more focus could also be devoted to 'follow' a listed company's dividend announcement, especially cash dividends. 

Why so?

At the end of the day, cash dividend payment represent one of the methods for a company to reward its shareholders. Wouldn't it be nice to manage and keep on receiving steady and growing stream of dividend from our invested companies?

When a company pays a dividend, it is not just handing out cash to shareholders. There are other signals from a dividend payment that an income investor could identify:

1) Shareholders' Interest In Mind

Dividend payment implies that the company has shareholders' interest in mind.

2) Evidence of Financial Strength

A company need to pay dividend via cash, it can't pay dividend using profits per se. Financially troubled companies rarely have the sustainable resources to pay dividend. Although a corporate can borrow money to pay dividend, this is not a sustainable method or desirable way to finance the dividends. 

3) Foundation for Stock Valuation

A company that pays consistent dividend, provide investors a mean to calculate the stock value as stock value need to be formed upon a basis.

4) Better Group of Investors

Dividend paying companies may attract better shareholders. Income investors are less likely to overreact to any single movement in the share price unless there is fundamental deterioration in the company. If the share price declines not due to structural or fundamental issue, income investors may scoop up the shares to improve the dividend yield, providing some support to the share prices.

5) Sticky Dividends

Corporate will not simply cut dividends. A company that pays consistent dividends may create expectation among investors to continue to receive the dividends, hence this situation may result in corporate managers to be more discipline in managing the company resources as dividend cut should be the last thing in their mind.

I firmly believe income investors who invest into good quality stocks that pay consistent and growing dividends, would also likely reap the reward of investment success. 

Lastly, a stock that pays constant and growing dividends, likely to experience increase in share price over the long term. 

Just look at Colgate Palmolive, Johnson & Johnson (J&J), Nestle Malaysia share price chart as an example, it is a nice long term uptrend, This  uptrend in share price, couple with rising dividends, would definitely enhance quality of living to income investors!