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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: TigerPaw who wrote (110177)	1/4/2002 9:34:14 AM
From: Art Bechhoefer	Read Replies (3) \| Respond to of 152472

Tiger Paw--Thanks for the links to the Nobel laureate economists. These comments relate primarily to Merton Miller's view that dividend policy is less important than a company's investment decisions. In view of the major changes that have taken place in tax policy over the last 40 years since Merton addressed this issue, I think his views would have to be revised somewhat. In the early 1960's, the capital gains preference was much, much less significant than it is today. Thus, the potential net profit for an investor from capital gains is much greater than for a similar percentage payout in the form of a dividend taxed at the full rate. As to the notion that a dividend is a form of advertising for a company, that is true in the sense that it tells investors what they can expect with a degree of certainty. But it still does not make up for the inefficiency of a dividend compared with the greater efficiency of a capital gain in terms of net profit to the investor after taxes. One of the main factors here is not the promotional value of a dividend but the fact that many institutional investors are prohibited under the terms of the funds they administer from investing in companies that pay no dividend. Thus, a dividend, while of some promotional value, may greatly increase the institutional demand for the stock, which in turn leads to higher overall demand and higher prices. Applied to QUALCOMM, I would much prefer the company to buy its own stock, rather than issue a dividend. But either of these alternatives is viable only if there is nothing better for the company to invest in, such as new patent development or partial ownership of promising new service providers in high growth markets. In short, the present investment policy of QUALCOMM appears to maximize shareholder value in a market characterized by rapid growth and rapid technological change. Art