5 ms·

Even a company that's growing ought to pay dividends in most cases. After all, if your shareholders have faith in continued good business they have the option o

by wonnage 15y ago

Even a company that's growing ought to pay dividends in most cases. After all, if your shareholders have faith in continued good business they have the option of reinvesting their dividends. Companies that don't pay out are essentially telling you that your money's better off in the company, which strikes me as a rather arrogant way to treat your owners.

akronim 15y ago
Dividends are basically saying "we're returning earnings because you can probably invest them better than we can". It's up to the investor balance their portfolio and decide how much money they have invested in the company, dividends are supposed to be that mechanism.
- wonnage 15y ago
  Sure, and as a shareholder I can say that I always know better. In reality I probably don't, but it's a matter of principle. We own this company, and they're telling us that they'd rather use all the profits they generated (out of the money we provided) for themselves. It's not that I think every company should always pay out a dividend. It doesn't make sense if you're growing fast, or losing money. Berkshire doesn't have to because we generally agree that Buffett's a better investor than the rest of us. For the vast majority of companies not in these categories though, it seems like the shareholders would be better off if they just got the cash.
  - adw 15y ago
    No, not for themselves; for their shareholders – ie for you. They're saying that there's an illiquid opportunity they can access which you can't. You might disagree with them; if you do, sell the stock.
ikono 15y ago
> "Even a company that's growing ought to pay dividends in most cases." That's not true. Companies have opportunities to invest money into things that a normal investor cannot. If a company can invest the money at an above average rate it should. For US investors, it's even more clear cut as dividends would be taxed if payed out. If the company instead retains and prudently invests that money, the company in essence is able to generate a return on money that would have been payed as taxes. Over the long haul, that "float" is extremely valuable.

by wonnage 15y ago

akronim 15y ago

Dividends are basically saying "we're returning earnings because you can probably invest them better than we can". It's up to the investor balance their portfolio and decide how much money they have invested in the company, dividends are supposed to be that mechanism.

wonnage 15y ago
Sure, and as a shareholder I can say that I always know better. In reality I probably don't, but it's a matter of principle. We own this company, and they're telling us that they'd rather use all the profits they generated (out of the money we provided) for themselves. It's not that I think every company should always pay out a dividend. It doesn't make sense if you're growing fast, or losing money. Berkshire doesn't have to because we generally agree that Buffett's a better investor than the rest of us. For the vast majority of companies not in these categories though, it seems like the shareholders would be better off if they just got the cash.
- adw 15y ago
  No, not for themselves; for their shareholders – ie for you. They're saying that there's an illiquid opportunity they can access which you can't. You might disagree with them; if you do, sell the stock.

ikono 15y ago

> "Even a company that's growing ought to pay dividends in most cases." That's not true. Companies have opportunities to invest money into things that a normal investor cannot. If a company can invest the money at an above average rate it should. For US investors, it's even more clear cut as dividends would be taxed if payed out. If the company instead retains and prudently invests that money, the company in essence is able to generate a return on money that would have been payed as taxes. Over the long haul, that "float" is extremely valuable.