When The Aggressive Distribution To Shareholders Is Promising
- Some companies offer a very high distribution (in the order of 10%) to their shareholders. However, this does not guarantee a great profit to the shareholders.
- Investors should check some elements in the balance sheet to determine whether the company can maintain its high distribution rate.
- Philip Morris has stretched its balance sheet to the extreme and hence it cannot maintain its past rate of share repurchases.
- On the other hand, Viacom has a healthy balance sheet so its shareholders can rely on the stock to maintain its exceptional returns for many years.