Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Apollo who wrote (12139)	6/21/2000 4:21:00 PM
From: Art Bechhoefer	Read Replies (3) \| Respond to of 60323

Stan, there are several reasons for not wanting to pay dividends. The main one comes from investment guru Warren Buffett, who refuses even to consider dividends for his Berkshire Hathaway company. The question is whether a company wants to use its earnings to invest in its own business, buy other businesses it considers undervalued, or pay a dividend, which is the only one of those three alternatives where taxes are owed immediately. A second reason, particularly for younger companies is that they are strapped for cash and don't have anything extra to pay out as dividends. If your business is growing rapidly, you probably want to do everything possible to keep it growing, without issuing more shares (which dilute earnings) or without borrowing (which leverages the stock). Also, think about the mechanics of paying dividends, especially quarterly dividends. It isn't only the check, but the envelope, dividend notice, postage, and even the special dividend meeting of the Board of Directors. If you own 100 shares, and a dividend of, say, $0.20 per share is declared, you get a check for $20.00 But the cost of the dividend is $20.00 plus all the other ancillary costs, which probably cost another dollar or so for each shareholder, even if the shares are held in street name. Is that a good way to spend money, especially when the dividend itself may be taxable at the same rate as ordinary income? Assume your tax rate is 30 percent. The company just spent $21 to send you a dividend check, and all you get after taxes is $14. That's why a growing number of companies either pay no dividend or pay just a token amount. And that's also why a stock like SanDisk, or even Intel is not considered very good for widows and orphans. However, if you think about it, there may be much greater risk in holding stocks whose return is eaten away by inflation. That's why I encourage the older people who rely on my advice to put at least a portion of their portfolio into growth stocks. Art

To: Apollo who wrote (12139)	6/21/2000 5:10:00 PM
From: Tumbleweed	Read Replies (1) \| Respond to of 60323

OT: Dividends. nevertheless, if it's that easy to widen the pool of potential shareholders, why don't all high tech companies declare some minimal dividend like INTC did? Compaq issued a dividend about 3 years ago when their shares hit a rough patch (they are still stuck there). I seem to recall the company issuing a statement to the effect it would enable investment funds to buy them (as Art has previously posted). That of course left aside the question of why anyone in their right mind would buy Compaq shares, but thats just a prejudice on my part. The dividend was fixed at 1c per share, either per quarter or per half year. This must have been a very expensive scheme to administer, I had several cheques in the region of $2.50 to $3.50 each which must have cost much more to produce and post than the cheque value. That may be one reason why more companies dont do this. Joe