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As I say, no dividends...no buy!
1 posted on 08/01/2002 8:44:52 AM PDT by razorback-bert
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To: Wyatt's Torch; arete; rohry; LS; meyer; DarkWaters; STONEWALLS; TigerLikesRooster; junta; ...
Calling
2 posted on 08/01/2002 8:45:29 AM PDT by razorback-bert
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To: razorback-bert
Amen. And I note that neither Republicans nor Democrats propose to do anything about the tax laws which discourage dividend payments. (Easy to understand, considering that the U.S. government is broke and has mortgaged all of our future productivity).
3 posted on 08/01/2002 8:48:31 AM PDT by SteamshipTime
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To: razorback-bert
Thanks for the economy pings!
4 posted on 08/01/2002 8:48:37 AM PDT by dennisw
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To: razorback-bert
Without dividends, all you have is speculative appreciation as an investment rationale.
5 posted on 08/01/2002 8:57:25 AM PDT by beowolf
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To: razorback-bert
Of course the problem with dividends is the double taxation.
The company pays a corporate tax on its earnings and if whats left over is sent to the shareholders as dividends, then the shareholders pay income tax on that as well.

What do you think the effect would be if common stocks were treated like Real Estate Investment Trusts (REITs)?
REITS pay no corporate income taxes as long as they pay out at least 90% of its earnings as dividends, therefore the income is only taxed once.
When you think that probably most of the income the company makes is scooped up by either taxes or retained earnings.... treating stocks like REITs (and requiring 90% of earnings to be passed through to shareholders) would probably juice up the dividend return substantially.
Anyways, I'm curious what you and the gang think about this.
6 posted on 08/01/2002 9:02:05 AM PDT by Maximum Leader
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To: razorback-bert
Thanks for the post. VERY informative.
7 posted on 08/01/2002 9:03:59 AM PDT by MeneMeneTekelUpharsin
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To: razorback-bert
As I say, no dividends...no buy!

I'm not buying regardless. Half of the companies paying dividends are borrowing money to do it.

Richard W.

9 posted on 08/01/2002 9:05:11 AM PDT by arete
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To: razorback-bert
Since officers and directors of publically traded companies are assumed to be criminals by the government and the public, the only rational thing for them to do is to buy back their stock as quickly as they can and go private. Get out of the public view as quickly as possible. Such buy backs are much more rational than paying dividents.
10 posted on 08/01/2002 9:09:57 AM PDT by Voltage
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To: razorback-bert
As I say, no dividends...no buy!

Not the best way to pick stocks. If you need income, dividends are great. If you want you portfolio to grow, dividends suck.

11 posted on 08/01/2002 9:11:48 AM PDT by Always Right
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To: razorback-bert
Why don't those companies pay dividends - even when, like Microsoft, they are virtually swimming in profits?

As someone else pointed out: you want income, you want dividends -- but if you want growth, dividends get in the company's way. Over the past 20 years or so, it would be impossible to find a bad time to buy Microsoft stock (if "long-term" hold means more than 2 years). Some companies grow reliably over long periods of time. The fact that they don't pay dividends is inconsequential.

Articles like this are easy to write after the fact. I take 'em with a heap of salt.

13 posted on 08/01/2002 9:30:04 AM PDT by ClearCase_guy
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To: razorback-bert
The fact that a company pays dividends to its shareholders doesn't necessarily mean its finances are on the up-and-up, as the writer implies.

In times past, a high dividend often correlated with a shaky balance sheet, just as the "high-yield" bonds popularized by Michael Milken reflected above-normal risk to the investor. Likewise, the now-discredited Universal Life policies were sold with a promise of guaranteed above-market interest rates, adding 12-14% to the cash value annually. High risk must be compensated with a high return.

In today's tax environment, where individual investors pay anywhere from 0% to 38% on income resulting from dividends, corporations must be sensitive to the fact that any money paid out will enrich Uncle Sam first, the stockholders later. A strong case can be made that the company can find better uses for the taxable portion than the federal government can.

Your no-dividend, no-buy filter may be appropriate if you are seeking income. However, being pragmatic about it, aren't you also forgoing the potential of much larger gains through price appreciation? As I recall, the average price gain over the past several decades has been greater than the 5.8% nominal dividend rate cited in this article.

17 posted on 08/01/2002 10:30:02 AM PDT by logician2u
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To: razorback-bert
The Philly Inquirer is a bad newspaper and I have no clue who Andrew Cassel is, but this crap isn't worth reading.

Ron Reagan admitted he made a mistake when he signed the 1985 tax increase bill that included making dividends taxable to both the corporation and then again to the individual, and eliminating the $100 dividend exclusion.

This article has a worthless statistic about historic dividend yields in the 20th century. Stocks actually yielded more than 30 year treasuries in the 50's to compensate for the additional risk, supposedly.

The tax change has soured the payment of dividends and made it more sensible to buyback stock (common) and eliminate preferred stocks. This is why stock yields are at record lows -- a fundamental shift in the tax code.

I still have stocks like MRK who continue to increase the dividend, but most are NOT increasing the payout -- Simple math -- 2/3 or more of the dividends end up in the IRS.

Ron made a mistake in '85 and was a big enough man to admit it.

P.S. The tax law on mutual funds was screwed up too (I don't remember when) and I once heard the founder of Vanguard, John Bogle, state that they were inappropriate for Non-Tax exempt positions.

19 posted on 08/01/2002 12:53:10 PM PDT by ReaganIsRight
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