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Sure, and then after that the best growth decision would be to invest in something else instead of paying dividends. The investors want money before they die o

Sure, and then after that the best growth decision would be to invest in something else instead of paying dividends. The investors want money before they die of old age.

kqr 3y ago
Next best, or same thing? Putting money in the hands of investors generally leads to investment. Dividends and buybacks are sort of an investment into your infrastructure, because the money goes through your investors into investments in the same general area.
- depereo 3y ago
  Dividends are explicitly not an investment into your company's technology and capability. They're an admission that you cannot invest in yourself with a decent rate of return. Returning money to shareholders in this way is what you do when you cannot grow TAM and cannot grow profits with investment.
wmf 3y ago
I think this is a narrow and old-school view of investing. Generally when a company invests cash flow into R&D it increases the stock price (as the market prices in the future fruits of that R&D). Many investors prefer price appreciation to dividends for tax reasons. If the stock doesn't go up, that's a signal to the company that investors do not want or do not believe that R&D.
skippyboxedhero 3y ago
It is all in the price. If you invest and create value in the future, it is in the price today. The only reason companies are doing buybacks is because it increases the CEO's comp (if you reduce shares, you increase EPS...many bonus packages are based on EPS). If anything it has a negative impact on returns because companies will typically buy back shares when they are overvalued. I think people assume that there must be a reason why companies are doing all this...there isn't. Companies are run for executives. It was bad ten years ago, since Covid it has reached comedic levels (where you have executives on packages at loss making companies that are meaningful percentages of the company market cap).

Sure, and then after that the best growth decision would be to invest in something else instead of paying dividends. The investors want money before they die of old age.

kqr 3y ago

Next best, or same thing? Putting money in the hands of investors generally leads to investment. Dividends and buybacks are sort of an investment into your infrastructure, because the money goes through your investors into investments in the same general area.

depereo 3y ago
Dividends are explicitly not an investment into your company's technology and capability. They're an admission that you cannot invest in yourself with a decent rate of return. Returning money to shareholders in this way is what you do when you cannot grow TAM and cannot grow profits with investment.

wmf 3y ago

I think this is a narrow and old-school view of investing. Generally when a company invests cash flow into R&D it increases the stock price (as the market prices in the future fruits of that R&D). Many investors prefer price appreciation to dividends for tax reasons. If the stock doesn't go up, that's a signal to the company that investors do not want or do not believe that R&D.

skippyboxedhero 3y ago

It is all in the price. If you invest and create value in the future, it is in the price today. The only reason companies are doing buybacks is because it increases the CEO's comp (if you reduce shares, you increase EPS...many bonus packages are based on EPS). If anything it has a negative impact on returns because companies will typically buy back shares when they are overvalued. I think people assume that there must be a reason why companies are doing all this...there isn't. Companies are run for executives. It was bad ten years ago, since Covid it has reached comedic levels (where you have executives on packages at loss making companies that are meaningful percentages of the company market cap).