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To: Art Bechhoefer who wrote (12144)	6/21/2000 6:02:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 60323

Art, actually, established companies that are generating excess cash pay two kind of dividends, the first, the cash dividend is taxable (sometimes at 50% rate, depending on the state you are in). The second type is avoidance of the tax system, they buy back shares with the excess cash they were going to pay out as dividends (thus increasing the holders proportion of the company) these dividends are not taxed at all. So, if a company pays 1% dividends and buy back 2% of its share every year, the actual payout of dividends is 5% if you are in the 50% tax bracket. As for debt, any company that can borrow, should borrow (but only to the extent that their EBT covers interest payment by at least a factor of 3 or more). The reason is quite simple, a well run company will have return on assets emplyed in the business in the range of 15% or higher, thus you want to increase assets on which you can get such returns to the max point of safety (coverage), this drastically increases return on stock holders equity. Zeev

To: Art Bechhoefer who wrote (12144)	6/21/2000 7:20:00 PM
From: Paul Senior	Read Replies (2) \| Respond to of 60323

Art, regarding dividends, if I understand what you are saying, then I agree with you -g-. You are not arguing against dividends per se, and are stating that some people who are focused on dividend paying stocks ought to also consider growth stocks which don't pay dividends. I believe that. Also your point that a company like SNDK might consider issuing a small dividend to increase the pool of potential buyers. Looking at it from a different angle, I believe some people who are only growth stock investors ought to consider dividend paying stocks too. Dividend paying stocks offer a couple of advantages. In any successful, viable (growing) business there will be significant number of projects (that are costly) that individual managers will favor or sponsor in order to advance their department or the company. Having to meet a dividend payment requires (sometimes) that projects be ranked and presumably (well, I presume, anyway) that many of these less significant, poorer ideas get chopped (which might not happen if a dividend did not have to be paid). In short, a dividend forces management to be disciplined. There are only two things an investor can get from his/her company: information (reports) and maybe a dividend. A dividend is a claim by the investor. Yes, one that can be abrogated by the BOD-- but they take heat if they reduce or eliminate it. In bad times a dividend (if it's maintained) helps put a floor on the stock. In good times, a dividend helps define a trading range for the stock (e.g. paper companies over the past 20 years might trade within a range of 1-5% based on their dividend yield.) One thing I can say fairly confidently about the paying of dividends: Whatever a company does - pay no dividends, pay a set dividend every quarter and never raise dividend, raise dividend occasionally, or raise its dividend every year ---- the company must endeavor to be consistent once it sets its policy. Paul Senior (refs: "The Intelligent Investor", "Relative Dividend Yield", "The Dividend Rich Investor")