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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: bearshark who wrote (31832)	10/17/1998 10:06:00 PM
From: Moominoid	Read Replies (1) \| Respond to of 94695

In countries where the capital gains rate is the same as or above the dividend tax rate companies pay big dividends. In countries where it is the reverse they do stock buy backs, takeovers etc. with the spare cash. They just choose the most tax effective way to increase "shareholder value". For example in Australia, individuals on the top marginal tax rate (and you only need a taxable income of $A50000 for that), pay 13.5% tax on dividends and 48.5% on capital gains. Dividend payouts are generally big. Many mutual funds known as "Imputation trusts or funds" invest in companies paying high dividends with attached tax rebates. These are the biggest mutual funds here. In the US the situation is completely reversed and therefore dividend payouts are low and have gotten lower as CGT rates have been slashed and marginal income tax rates for very high incomes raised. Therefore valuation based on dividends doesn't make a lot of sense (there are other good theoretical reasons as well). David