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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Geoff Nunn who wrote (83934)	12/6/1998 12:52:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Geoff I think I now understand the cause of the apparent impasse: timing!!!! I assume the following: suppose the firms starts the period with 0 disposable cash (because it had either paid a dividend or repurchased shares). You assume that the firm starts the period with $20MM in disposable cash (because it behaved like MSFT and simply hoarded cash). If you change the timing of the analysis, and use a dividend capitalization approach to valuation, you will see that there is absolute equivalency. I sent you a PM questioning whether our real disagreement was on the equivalency or on a residual dividend policy. In any event, the equivalency has nothing to do with eps. It has to do with the wealth of the shareholder. Clearly, a firm holding cash and not paying a dividend or repurchasing shares will have greater earnings than one paying a dividend or one repurchasing shares. But that ignores the fact that shareholder can exactly mimic that behavior. In the case of the dividend-paying firm he can deposit his cash in an interest bearing account, and in the case of share repurchasing firm he can sell equivalent shares to equal the dividend and deposit the proceeds in an interest bearing account. I hope this helps rather than muddying the water. TTFN, CTC