Originally posted by: CPA
Originally posted by: Michael
SuperTool - I make my investment decisions based on total return. Taht means dividends + stock price appreciation.
If you do not grow the company long term, you have no way of increasing dividend payments.
Paying out your earnings to shareholders can be good for capital managment within the company. There are tons and tons of examples of companies that generate a ton of cash during whatever business cycle they're in. Since they can't grow their core business any faster, they do M&A deals outside of their space. In most cases, this turns out poorly.
It would be better for them to give me the money (in the form of a dividend) and let me make the capital allocation decision.
Michael
My company has awesome cash flow, about $1B a year, but we only pay an annual dividend of $.01 per share (over 600 million shares outstanding), sometimes. Bush's plan would NOT change my companies dividend payout. And since a company can not pick and choose who it pays out, it would not benefit the company to change the method in which in compensates it's highly paid employees.
You don't own your company, the investors do. And if the investors demand that your company pay more dividents because they want some tax free income, your company will either pay a divident, or the investors will sell your stock and buy some divident paying one, bringing down the value of your company.
Supply and demand. If there is demand for divident paying companies over growth companies, companies will be pay more dividents and grow less.