bearfund

GE's Dividend Assertion is Dangerous

You ask whether companies relying on government handouts should be allowed to pay dividends. What, sir, do you think is the point of these handouts? A corporation receiving one can do three things with it: pay it out in dividends, buy T-bills with it, or "invest" it in some new or existing business. If it pays out, the thousands or millions of shareholders, many of them pensioners, will have a little more money to spend. If it "invests" it, thousands of employees will take home money they otherwise wouldn't have. If they buy T-bills with it, their balance sheet looks better but the money itself goes right back where it came from and does nothing.

You ask me, GE (like many other public companies) is simply acting as a conduit for getting printed and/or borrowed money into the hands of individuals who will spend it, quite probably on things they don't need. Which of course is exactly what the government wants: an economy leveraged to the hilt needs so-called discretionary spending to keep growing at a rate faster than the rate of interest it has to pay on its ever-growing debts. If that doesn't happen, it collapses. There is no practical difference in economic effects, especially for a company so widely held by conservative, traditional individual investors, between paying dividends and employing unproductive surplus labour. We can leave the political distinction to the politicians.