4 ms·

IIRC the reason companies focus on growth over paying dividends is due to the tax structure.

by dantheman 14y ago

khuey 14y ago
Absolutely. Tax rates on LCTG are much more favorable than tax rates on dividends.
- vetinari 14y ago
  Well, you pay taxes when you realize the gain (i.e. when you sell the shares). Until then, it is only theoretical and there is nothing to tax (the share price can also go down, not only up). Another POV is, that when company pays dividends, they are not sure what to do with the money, they have nothing interesting in pipeline and therefore they can not provide better return on investment than the investors individually can.
  - orofino 14y ago
    Regarding the paying of dividends representing the lack of innovation, I have this to ask: have we ever had a company with such massive cash reserves relative to the balance of the market? I think it makes (common) sense that this is a signal of ending innovation, however, Apple has so much cash, it is difficult to fathom what they could possibly do with it other than return it to the shareholders (which they ARE doing). That is the other strange thing I see about all of this, they ARE returning value to the shareholders in terms of dividends, are these big shareholders (Einhorn et al) just not happy with the rate at which they're being paid?
    - khuey 14y ago
      This is an important point. The traditional "dividends mean mature company with declining innovation/growth" line of thought may not apply here. Apple has more cash on hand than the state of California spends from the general fund in a year. Apple is in uncharted waters for a private company here.
prostoalex 14y ago
Not really. Up until this year receiving a qualified dividend would be a 15% tax for most income brackets http://en.wikipedia.org/wiki/Dividend_tax#United_States http://en.wikipedia.org/wiki/Dividend_tax#United_States It's more of a strategy question.
- jonknee 14y ago
  That doesn't matter, if Apple can invest that money the returns on that investment are also taxed lower. Giving the cash back says they have no way to make you a better return.
  - prostoalex 14y ago
    lower than what?
    - jonknee 14y ago
      Than income. It's a capital gain.

IIRC the reason companies focus on growth over paying dividends is due to the tax structure.

khuey 14y ago

Absolutely. Tax rates on LCTG are much more favorable than tax rates on dividends.

vetinari 14y ago
Well, you pay taxes when you realize the gain (i.e. when you sell the shares). Until then, it is only theoretical and there is nothing to tax (the share price can also go down, not only up). Another POV is, that when company pays dividends, they are not sure what to do with the money, they have nothing interesting in pipeline and therefore they can not provide better return on investment than the investors individually can.
- orofino 14y ago
  Regarding the paying of dividends representing the lack of innovation, I have this to ask: have we ever had a company with such massive cash reserves relative to the balance of the market? I think it makes (common) sense that this is a signal of ending innovation, however, Apple has so much cash, it is difficult to fathom what they could possibly do with it other than return it to the shareholders (which they ARE doing). That is the other strange thing I see about all of this, they ARE returning value to the shareholders in terms of dividends, are these big shareholders (Einhorn et al) just not happy with the rate at which they're being paid?
  - khuey 14y ago
    This is an important point. The traditional "dividends mean mature company with declining innovation/growth" line of thought may not apply here. Apple has more cash on hand than the state of California spends from the general fund in a year. Apple is in uncharted waters for a private company here.

prostoalex 14y ago

Not really. Up until this year receiving a qualified dividend would be a 15% tax for most income brackets http://en.wikipedia.org/wiki/Dividend_tax#United_States http://en.wikipedia.org/wiki/Dividend_tax#United_States It's more of a strategy question.

jonknee 14y ago
That doesn't matter, if Apple can invest that money the returns on that investment are also taxed lower. Giving the cash back says they have no way to make you a better return.
- prostoalex 14y ago
  lower than what?
  - jonknee 14y ago
    Than income. It's a capital gain.