Comment by hiddencost
Comment by hiddencost 7 hours ago
Why not?
Suddenly they had a more lucrative was to spend their money, so they did.
Comment by hiddencost 7 hours ago
Why not?
Suddenly they had a more lucrative was to spend their money, so they did.
It’s likely, dividends provide higher levels of exponential growth long term for an otherwise steady state company. It makes them more compelling than many long term investments.
Convert X% of a stocks value into a dividend and you pay taxes on that before you can buy more stock, but someone who keeps buying stock sees an exponential return. (Higher percentage of the company = larger dividends)
A company buys back X% of its stock functions like a dividend w/ stock purchase, but without that tax on dividends you’re effectively buying more stock. Adding a tax on stock buybacks could eliminate such bias, but it’s unlikely to happen any time soon.
On one hand, sure. They're able to make an informed decision to maximize return to shareholders.
On the other hand, a ton of amazing inventions came out of that system which created entire industries that went on to turbocharge the economy and create millions of jobs. I can see how someone may feel that a company being able to inflate it's stock price more is less useful to humanity and not worth the trade.
There may have been other reasons as well for the collapse of corporate research like changing tax rates, or maybe we were just in a golden age (1940s-1980s) as new advancements in physics and materials science allowed for a rapid amount of discoveries and now we're back in a slower period.
I wonder if Milton Friedman regrets going out and popularizing that and saying the board has a duty to maximize shareholder profit and all that.
Because before buybacks there were dividends. Did the difference between buybacks and dividends really make the difference between doing basic research and not?