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Strategies & Market Trends : Dividend investing for retirement

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To: Steve Felix who wrote (30462)	1/21/2019 9:43:46 AM
From: E_K_S	Read Replies (2) of 34328

Company pays a dividend or company reinvests the capital. There always has been the argument that a company could use it's capital better to reinvest it back into the company buying new more productive capital assets. The same w/ buying back shares vs paying a shareholder dividend. Buffet companies reinvests their capital back into the business and pays no dividend. He does have a set price where he will use some of the accumulated retained earnings to buy back stock. I think the only negative from a finance/efficient use of capital are the taxes the company must pay on the dividends paid to shareholders. That said, many companies (like the dividend aristocrats) have made it their policy to pay a dividend and to grow those payments over the years. That attracts a certain type of investor that will generally be a long term holder/accumulator of those shares. In my case, I have some MLP's where I 'drip' those dividends for new shares (and receive a discount). It's a win-win for both the company and shareholder. It's cost less for the company to 'drip' new shares than to go to the market and float a secondary offering. So there can be made an argument for a company NOT to pay dividends but in reality only some very special cases (like Berkshire Hathaway Inc) exist. (note: High growth start ups will generally not pay a dividend and that is a class of stock that has a higher risk of failure too. ) Like you said in a tax deferred account, there is no difference to the shareholder w/ or w/o the dividend. You receive the money now (in current/future dividend streams) or latter in future capital gains. I prefer to receive both. The key is buying the right company at the right price. Good investing EKS

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