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Strategies & Market Trends : Value Investing

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To: Mark Marcellus who wrote (33403)	2/1/2009 11:46:50 PM
From: Jurgis Bekepuris	Read Replies (3) of 78739

What Buffett has said, is that dividends should be paid ONLY IF the cash flow reinvestment into business does not bring back good return. And even then buying back stock is possibly preferable (depending of course on the price of the stock). As you may know Buffett never bought a stock for dividends (bonds and preferreds don't count) and never paid a dividend himself (WSC is kind-of special case ;)). Dividend paying companies would rather be caught dead than to admit that dollar reinvested into their businesses is not bringing adequate returns. So they explain dividends with a lot of hot air - support for shareholders, income for shareholders, etc. There is no medium. Either company CAN reinvest earnings with a good return and then they should not pay dividends. Or it CANNOT and then they should pay out everything as a dividend. No CEO/CFO will ever do this though, since nobody wants to run a non-growth cash cow or admit they have such company on their hands. If you want support from Value Investing masters for dividends, bring up Graham. He liked them. Not Buffett though.

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