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  • Share Buybacks, Dividends and Uninformed Investors  [View article]
    Great artice!

    You should have mentioned that 15% taxes on dividends thanks to the Bush tax cuts greatly encouraged the dividend option. That's why just over a year ago, a doomed, overleveraged company like Countrywide was still paying dividends. It's also a large part of why struggling companies such as Citi, GM, and Ford consider the dividend to be a sacred cow rather than a luxury. A lot of companies right now are taking loans and paying 7-10% interest just to pay their dividends. Example: GE borrowing from Buffet at 10% plus options, but not cutting that dividend!

    You should have also mentioned that the 20-year trend of compensating executives and board members with stock options, rather than cash, had the effect of encouraging them to make stock-buyback decisions, even if that was not in the firm's long-term interest. That would be just another example of how this compensation scheme has gutted the economic value of American companies by encouraging short-term manipulation rather than long-term value creation.
    Oct 27 10:10 am |Rating: 0 0
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