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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (54530)	4/4/1999 3:18:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 132070

Tippet, there are two separate issues, the price of the stock and the dividend they pay and how these relates. In the good old days when you could find good values, you could buy a stock with a dividend rate of 3% to 5% and you compared this with bonds (which long ago also had rates like that) and decided what risk you are willing to pay for the "promise" that the dividends (unlike the coupon) will increase year after year. All I am saying is that today, when corporations are buying back their shares, they are buying these for you (the shareholder that does not sell his shares) with money they would have had otherwise used to pay you dividends (borrowed or retained earnings). This buyback is a tax free dividend and thus worth much more than normal dividends, and in the valuation model you take (like yield) you'd better take this into account to get a proper picture of the yield you get relative to, for instance, treasuries or money market interest which are fully taxable. Zeev