Tommaso, I have no disagreement that 500 is much better than 350 for the Korean market, yet it is down fromm above 800 and what is not considered her, is that the Won is less than 50% of what it was when the market was at 800. Since this market is denominated in Wons, you can see that these assets have been quite devalued despite the recent "bounce".
As for the 130%, a tax free dividend of $1 is worth $1.50 of taxable dividend (or thereabout), I just took in my calculations 130%. As for the wisdom of a company buying its own shares or paying dividends, in the current tax strudture of double taxation I think that stock buy back (at whatever book value, of course within reason) is a valid strategy. Let say that a company has an internal policy to distribute to shareholders 30% of its annula net earnings. It can pay it all out in dividends, which the recipient will then have to pay taxes at possibly close to 50% (39.6% Federal and about 10% for State taxes), so buying back in tax free transactions with a portion of those 30% your company own stock is not such a bad idea. Now you say, but the recipients of cash (for the stock) are going to pay taxes on their cash receipts, you are right, but first they pay long term capital gains (now in the 20% bracket rather than 39.6%) and they pay only on the appreciation (let say 50% of the selling price) thus the difference in taxation is quite dramatic for the same dollar assigned to be paid back to stock holders in either direct dividends or in the form of stock buy backs.
Zeev |
