The big term that people like to use these days is sustainability, the rate in which resources are used equaling the rate in which resources are replenished. In a nutshell, not depleting the environment of its natural resources. It’s a great goal to have, but how well are we doing it?
If we look at our resources in the terms of dividends and capital, it might put things into a different perspective.
“…dividend and interest are seen as more long lasting and permanent sources of income which can be consumed without hurting the wealth while capital gains are not permanent so withdrawing them will have an adverse effect on total wealth.” – Jesal Shethna, Dividend Versus Capital Which Is Better
Our dividends are sunlight, wind, etc. Our capital is oil, coal, etc.
When it comes to capital, we’re taking or “investing” in things that we can’t return. Coal is carbonized plant matter that takes millions of years to form. The coal we are using today has been forming for 300 million years. It doesn’t seem easy to replace, does it? Natural oil production isn’t much different. We’re pulling it from deposits that originated in a different Era. Keep in mind that this is only touching on replacement issues. It doesn’t include the ripple effects that it has on the environment for extraction, production, and use.
Dividends, on the other hand, work for us without us having to take anything at all. The sun rises and the wind blows. Before industrialization, that’s what we relied on. If those natural resources got the planet this far, there’s no reason why it can’t continue to. We have 4.6 billion years of evidence to back this up. Sounds like a pretty good track record to us.
2016 showed a lot of progress for renewable energy and 2017 is looking just as promising. We’re making progress on renewable energy and it’s only a matter of time before we’re depending more on our dividends than our capital.