Robert O, RE: Your post proves the point that there will always be those who myopically concentrate on dividends for really no good reason. It's downright SILLY to compare a quarter of GAAP earnings to cash flow paid out in dividends (which are paid out, perhaps, to appease the few old timers who still think ANY dividend payout signals strength to the marketplace). Shall we compare today's gain in market cap. to years of dividends it represents and keep this fruitless exercise going?
While I would certainly agree with you that comparing one quarter's GAAP earnings with dividends paid is a rather silly exercise, I would ardently disagree with your assertion that dividends are unnecessary.
First of all, dividends represent cash flow to the investor, which is one of the reasons that many people invest. Yes, perhaps you don't care about that cash flow, but there are many investors that do. Note also that companies that pay regular dividends and increase those dividends on a regular basis are valued more highly in the market than companies that don't. Thus, Intel's policy of regular dividends and the policy of increasing those dividends leads to your reward even if you DON'T want those dividends. While you may ridicule those old timers that feel that dividends are a signal of strength, the fact of the matter is that the market disagrees with you. Unlike share repurchases, which cannot be depended upon, dividends are more of an obligation. They do indeed signal strength.
And, by the way, just as it is silly to compare Intel's GAAP quarter to dividends paid, it is also silly to compare the dividends that you have earned with the value of Intel stock that those dividends could have represented. Sure, ex post the stock is worth more, but at the time of payment of the dividends you cannot be assured of this fact. In the long run, yes, stock will probably be worth more, but it will be more risky, too. I'm sure AMD investors would have liked a few dividends a decade or so ago. |
