That is very interesting.
I've been noticing, this year, a variety of companies raising cash, by selling securities that pay interest and are tied to a stock (the interest rates above the dividends paid by the associated stock or stocks). In effect, I think we are seeing a return to the very old-fashioned idea that stocks should pay significant dividends. Even growth stocks. Investors are becoming steadily less willing to accept the idea that future growth should allow a company to not pay dividends now. But, this concept is being applied in a way that creates a bifurcated market. That is, there are still the "second-class" equity-holders, the ones who own the common stock, who still get little or no dividends. And, as this movement takes hold, a steadily increasing fraction of present and future earnings will be dedicated to paying the interest on issues like this Lehman offering, or convertible bonds, or similar instruments. And this will cause a fall (relatively speaking, and perhaps in absolute terms as well) in the common (= low-dividend) stock. Very interesting. The implications ought to be obvious. The smart money should flow into the "uncommon" stock. |
