Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: TobagoJack who wrote (27016)	1/7/2003 12:29:14 PM
From: Ilaine	Read Replies (1) of 74559

>>In particular, how will you play the 'dividend tax cut'?<< Two macro things will happen, one short term, one long term. Short term, investors will flock to companies which pay dividends. Expect share prices (of companies paying dividends) to go up. Long term, companies will start paying dividends rather than retaining earnings. This will have a lot of interesting side effects -- less of an incentive to give the CEO a gold plated trash can, which is a Good Thing; less of an incentive to invest in R&D, which may be a Good Thing and may be a Bad Thing. I would expect CEO salaries and perks to go down, as well as R&D and capital investments. Oh, and less incentive to massage earnings so that there is "growth". One nice thing about dividends - you can't fake them. Which may lead to the unintended(?) consequence that old companies that pay dividends will be more popular than new companies that don't. No more insane valuations? No more dot com bombs?

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