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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grommit who wrote (15454)	1/8/2003 4:01:53 PM
From: Bob Rudd	Read Replies (3) \| Respond to of 78702

ACAS & ALD Fat dividends & potentially more favorable tax treatment got me digging - Came up with this: 1/8/03 Herb G: BUSINESS-DEVELOPMENT COMPANY DIVIDENDS MIGHT NOT BE INCLUDED IN THE PLAN? Dividend dollop: I can hear the brokers now as they called investors last night trying to sell American Capital's (ACAS:Nasdaq - news - commentary - research - analysis) spot secondary offering. At 4 million shares, the deal was double what brokers at the underwriting firms were telling people yesterday. Never mind the dilution to existing holders -- look what they had to sell to individual investors: A high-yielding dividend stock at a time when taxes on dividends are likely to be cut. Think anybody ever told those investors that BUSINESS-DEVELOPMENT COMPANY DIVIDENDS MIGHT NOT BE INCLUDED IN THE PLAN? Even American Capital bull Donald Destino of Banc of America Securities says HE DOESN'T EXPECT THE TAX SITUATION WITH BDC DIVIDENDS TO BE CHANGED. In last night's downgrade of American Capital rival Allied Capital (ALD:NYSE - news - commentary - research - analysis), Destino wrote, "IT IS OUR VIEW THAT THE AIM OF DIVIDEND TAX RELIEF IS TO ELIMINATE DOUBLE TAXATION OF DIVIDENDS AND WOULD LIKELY EXCLUDE DIVIDENDS PAID BY COMPANIES LIKE ALLIED THAT PASS ON PRETAX INCOME IN THE FORM OF DIVIDENDS. In fact, IF THE DIVIDENDS OF COMPANIES LIKE ALLIED ARE EXCLUDED FROM TAX RELIEF, IT COULD PROVE TO BE A NEGATIVE FOR VALUATION." Remarkably, in the same piece Destino continued to rate American Capital as a buy, with a $31 target. Isn't that a double standard, especially in light of what he wrote about Allied? Not when American Capital is trying to raise cash! Wouldn't want to get in the way of that, would we?