Rich,
GE does indeed pay a dividend.
I think that the idea that dividends dilute stock price was due to the "this time its different - pre bubble pop" analysis.
Dividends do sometimes make sense. First of all, they tend to provide a floor (and some stability) for a company's stock price. Second, not all stockholders are required to pay taxes on their dividends (but some long term investors require dividends of a stock before purchasing). Third, if a company has a lot of cash, they may not want to just buy other companies (just because they have the cash), that are outside their area of competence - usually not a good idea. Fourth, if a company occupies a dominant market position, it often runs into regulatory problems, trying to buy out what little competition there may be in their market, or use the money to "buy" a dominant position in another market. Finally, a few years ago, cash rich companies often had another problem - Corporate Raiders.
IMO there were a host of reason why Microsoft was not bait for the raiders of 15 years ago. |
