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To: Art Bechhoefer who wrote (110176)	1/3/2002 6:00:31 PM
From: TigerPaw	Read Replies (1) \| Respond to of 152472

dividends beyond a modest level are counterproductive. The work of economomist Miller showed that dividend policy is irrelevant to company valuation. www-news.uchicago.edu while the most recent prizewinners lib.uwo.ca have shown that dividends can be used to advertise the health of a company which in turn increases the perceived value. TP

To: Art Bechhoefer who wrote (110176)	1/3/2002 6:34:28 PM
From: Wyätt Gwyön	Read Replies (2) \| Respond to of 152472

On the minus side, dividends are taxed twice, the first time as part of company profits and the second time as income to the individual investor. well, this has always been the case. as it stands, aggregate taxation on dividends is probably lower than at any other time post-war, thanks to the massive presence of tax-sheltered IRAs, pensions, and the like. so, in fact, from a taxation perspective, dividends are now more attractive than in the past, for a greater portion of the money in the market. As long as the tax code allows this double taxation, it seems to me that dividends beyond a modest level are counterproductive the problem with nonpayment of dividends is that none of the other options for cash disposal are as "sure" as cold, hard cash. e.g., increasing "retained earnings" and buybacks are dependent on continuing high earnings multiples, which are by no means guaranteed. the lower payout ratio obtaining today has not been backed up by higher earnings growth as dividend detractors would suggest. Instead, if a company really has enough cash to pay dividends, it also has enough cash to buy its shares, thereby increasing the earnings per share and potential gains subject to the capital gain preference cash-out via dividends allows investors to diversify their holdings, whereas share buybacks do not. a larger problem with "mechanical" buybacks is that they may take place at high market prices, resulting in a waste of money when share prices correct. (i agree that strategic buybacks, when a stock is "cheap", should remain an option. but most companies today do not have this problem at all. which is to say, they are basically overpaying in their buybacks.) the decreased prominence of dividends means cos don't have to part with cold cash, and earnings quality has suffered as a result. investors already take a risk just by owning an equity. at least with dividends, they are able to siphon off some of that risk. none of the other options of cash disposal do this, and they are all dependent on the continuation of a Ponzi-finance atmosphere imo. i predict dividend yields will make a comeback and be much higher 10 and 20 years from now!