Ronald Pires

Bye-Bye Dividends

I don't buy it.

1) If dividends are stopped, then they become retained earnings. How does that then negatively affect the stock price? The government has not taken the money away; it simply is rearranging access to it.

2) If dividends are taxed as ordinary income, companies will be less likely to pay dividends. Again, these will become retained earnings boosting the stock price. That boost in stock price will then be taxed as capital gains. Again, the same amount of money. You just get at it differently.

So how again does the stock price suffer?