banyan49

Warren Buffet, The Ultimate Dividend Investor

As James said, if the management can effectively reinvest the free cash (get at least one dollar for every dollar invested), then they should retain the free cash instead of giving out dividend. However, if the management cannot effectively do so, the logical choice is to give it back to the shareholder and let shareholder decide the best way to allocate these money.


On Nov 02 03:56 PM Football Geek wrote:

> I assumed the opposite of Warren Buffet, that he would want to have
> those earning kept by the company to compound and grow. Dividends
> that are
> paid out are taxed yearly, while cash that is kept by companies grows
> and
> eventually you pay capital gains, but they are paid only once. So
> all that money you paid in taxes could have compounded inside the
> share price over the period that you own the shares.
> Warren beleaves that compounding is the secret to the highest after
> tax
> rate of return. Owning a company is alot more about fundamentals,
> then what they pay out as dividends.