Found it online here

This a great discussion - It would be nice to have some clarification, with proof to back it up.  Thanks...

Laura

Hi Laura, the only “proof” I have seen is the article by the S&P author today on CNBC. (Linked in a message below). In my opinion buybacks do a couple of things; one is to prop up the price in the short term. My question is, why not concern themselves with increasing profits instead of this short term approach. Most buybacks prop up the price short term and benefit those few who have stock options. If the stock is at such an “under valued price” why are they not buying the stock with their own money? Secondly the buying back reduces the number of shares outstanding, thus increasing the EPS. Again, grow the profits and they won't have to bother with how many shares to repurchase. To me this is wasted energy and not the company’s core business. One argument for not wanting to pay the dividends is that they give the company less flexibility if things tighten later on down the economic cycle. Hockey Puck!!! If the dividend policy stated a certain percent payout goal the company could pay out profits and this would take out any surprises in future releases. One would know that they are always going to get 33% payout ratio or whatever number the company sets. Dividends benefit all shareowners while buybacks benefit a few. Some CEO’s even claim to be concerned with putting a tax burden on the shareowners, more hockey puck! I’ll take responsibility for my tax burden just as I do with the other monies I collect during the year. So as you can see I am a dividend believer!

Here's the Lord Abbett article mentioned in the Barrons article. Shows chart of dividend payers vs non payers for the past 35 years.

https://www.lordabbett.com/articles/return_of_dividend.pdf 

Laura, so you are not blindsided remember that you will pay income tax rates on deferred acounts not capital gains when you withdraw these accounts. This goes for all gains, price and dividend growth.

Which means I should be socking as much as I can into my ROTH account which grows tax-free, right? 

Laura

That is what I do with my Roth. Last year the max was $4000, or $5000 if you are over 50. Other tax free investments that I know of are municipal bonds. I have never dealt with those.

----- Original Message -----

From: classroom@stockcentral.com

To: ralphseger@comcast.net

Sent: Sunday, November 11, 2007 11:32 AM

Subject: [The Classroom]: RE: Barrons - "Speaking of Dividends" (efb1c192-fce7-4d4b-954d-89d576c917ba)

 

From the The Classroom forum at StockCentral.com, Bob Blanchette writes:

Danny,

 

Thanks for the Lord Abbett article.  It helped reinforce my view of dividends.  I would like to see a more indepth discussion of buybacks and their effect on dividends.  If management if being rewarded with stocks, is it better to give dividends vs buybacks?  If the Board authorizes buybacks, and management purchases stock when they are on sale or of great value, what then?

I own a electric company who had several bad quarters but refused to stop the dividend.  Instead of becoming a Albatross, it became a target and inspiration to make the dividend. 

 

What is your view of ROE and its relation to dividend payout?

 

Bob

----------
Posted by: Bob Blanchette

12/8/ issue of Barrons has an article titled "Buybacks that Bite back" The story carries stats that show again that buybacks are not helpful to the the shareholder. Most buy backs are covering options grants to upper management. some are taking on debt to the detriment of their financial ratings just to fund these buybacks. The last paragraph states, "Over the long haul, the best way for Corporate America to make shareholders happy might be to spend less effort on buying shares and more on finding new opputunities to expand its businesses".

Here's a review of dividend payouts in 2007 and an outlook. I like what they are saying.

Hi Robert, yes I have heard and read that concept in different media outlets. However, I am of the camp that I and many are able to manage our tax situations. I would rather have them give me my cash and then I can decide if putting that money back into the same stock is a worth investment. If I know what my dividend income will be in any given year I have time to negate, or not, my tax liability. Probably not a right or wrong on this but it comes down to preferences.