The chart below highlights two issues:
1) How long did it take for a stock to get to breakeven?
In the case of National Dairy Products, the stock did not get to breakeven by the 1937 peak. National Dairy declined approximately -90% in price from 1929 to 1933. From late 1933, National Dairy rose as much as +180% to the 1936 peak.
2) What happened to the dividend during the stock market crash and "Great" Depression?
In spite of the market decline from the 1929 peak, National Dairy’s earnings continued higher by the end of 1930. Once earnings started to slide in 1931, the pace of dividends continued to move higher. In 1932, it became apparent to management that the dividend policy had to be reduced. The pace of the decline in dividends tracked closely the decline in earnings. However, when earnings started to increase, the dividend was not pushed higher until two years after the trend reversed in earnings.
The change in dividend policy is a great example of management’s expectation of future prospects. However, when a policy of cutting the dividend started, in 1932, most dividend investors were probably becoming fearful of the prospects going forward and reacted by selling their stock. In reality, 1932-1933 was the time to start accumulating shares of the stock.
