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When a company reaches saturation in their core market and can no longer find new ways of investing free cash flow from the business into new markets that are l
by lowkey 2y ago
When a company reaches saturation in their core market and can no longer find new ways of investing free cash flow from the business into new markets that are likely to grow the value of the business greater than their cost of capital it has two options:
1. Pay dividends
2. Buyback shares
Microsoft and now Google started paying dividends. Apple is choosing buybacks.
Both options also mean that these companies have run out of ideas for further growth and are now transitioning into cash cows with reduced future growth prospects.
- pinkgolem 2y ago>have run out of ideas for further growth That's not true, it's simply means they have more cash then they can invest. Not that they do not invest any more.