To: Earlie who wrote (75728 ) 3/5/2001 5:37:06 PM From: Zeev Hed Read Replies (3) | Respond to Earlie, I was just looking at EK as a potential "Dow dogs" play (no, I decided to forego that one), but what struck me is that the valuation based on "traditional dividends" measure is astounding (that is probably why it is not a good play.). Last year, EK paid just $1.76, or on $44/share a rate of 4%., some people may think this to be a "fair" return. However, EK also spent $1.8 B to acquire it own shares, or $6/share. Now, if I owned EK and they decided to pay this $1.8 B in dividends, I'll have to pay close to 40% taxes on that. To get the equivalent of $6 per share, EK would have had to pay out $10/share in dividends. Thus, the real after tax dividends on EK last year was a stunning $11.76, more than 25% of the current stock price. Any company that pays out 25% rate (and of course does not make that money), is problematic for me, it indicates that they do not know where to redeploy these funds in the business to bring in good returns.
