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In fact it is a terrible idea to pay dividends. You can thank the tax code if you subscribe to that school of thought.

• HWR_14 4y ago
  Why on earth would you think dividends are a terrible idea?
  • echelon 4y ago
    1. Theoretically speaking, this means the company has nowhere else better to put that cash [1]. Rather than reinvesting back into itself to fuel growth, dividends return company proceeds to investors. It's a sign of slow or no growth. 2. As an investor, you can't control when and how you're taxed. Dividends are taxable when they are paid out. A company stock buyback, on the other hand, would increase the value of your shares and let you sell when you're ready. [1] Discounting stocks like REITs which are required to return profit in the form of dividends.
    • geysersam 4y ago
      > Nowhere better to put their money Same could be said about stock buybacks. In principle they're the same, only one has better tax characteristics. > Rather than investing into itself. Why would a mature business continue to invest into itself perpetually? What's in it for the investor?
    • boppo1 4y ago
      This content of your post is exactly what the article is addressing.
• mvhvv 4y ago
  What do you think the value is in a stock that doesn't pay dividends? It seems to me that if you remove them, you're getting into pyramid-scheme territory.
  • nmfisher 4y ago
    (1) the expected value of the company changing its mind and choosing to pay dividends in future + (2) the value of vote to remove management and replace them with someone who will pay dividends + (3) a legal right to share in the proceeds of sale/dissolution of the company. These are actually worth quite a lot. But you do make a good point, particularly when it comes to companies like Facebook, who don't pay dividends but have dual class structures so management can't be ousted. I don't know why regulators allow these companies to be floated like that, they're pretty much the antithesis of what public companies are supposed to be. If Zuck's metaverse bet fails (which I anticipate it will), and he doesn't pull another rabbit out of the hat, I expect we're going to see a lot more institutional investors complaining about dual class structures in the next few years.
    • benj111 4y ago
      The op stated > A stock is worth the present value of future dividends 1 and 2 are a restating of that. 3 is another way of returning money, but the money still has to be there.
    • PedroBatista 4y ago
      I don’t know much about FB structure but there has been some murmurs about the board offering Zuckerberg a one way plane ticket to Hawaii soon. Is this even possible? “No one” cares about dividends since they are taxed like income and after corporate buy backs going the route next year I wonder what Wall Street will come up with..
  • ummonk 4y ago
    You can sell your shares back to the company. That's the stock buyback that the linked article hates so much. It's just a more tax efficient alternative to dividends.