02-16-2014, 03:20 PM
I generally despise the Motley Fool, and avoid it as much as I can. That said, I did end up reading this article and finding it pretty interesting.
The thesis is that generally, corporate emphasis on dividend stability is a pretty recent phenomenon. I think the conclusion drawn is far too broad to even be useful: that investing in the business has become subordinate to paying dividends. This of course is a company by company question, and more importantly disregards that companies are likely much better run than 30 or 70 years ago. It is not so hard to believe that improvements in management, information, metrics, and planning make it more possible today to manage a business so as to co-optimize business investment and shareholder returns. Not to mention that we are generally talking about companies that are completely mature and do not require the same level of ongoing investment as they once did.
Anyway, I think the article is speculative and full of holes, but I appreciate that is offers a more broad perspective that is often missing from my thinking about the role of dividends generally.
The thesis is that generally, corporate emphasis on dividend stability is a pretty recent phenomenon. I think the conclusion drawn is far too broad to even be useful: that investing in the business has become subordinate to paying dividends. This of course is a company by company question, and more importantly disregards that companies are likely much better run than 30 or 70 years ago. It is not so hard to believe that improvements in management, information, metrics, and planning make it more possible today to manage a business so as to co-optimize business investment and shareholder returns. Not to mention that we are generally talking about companies that are completely mature and do not require the same level of ongoing investment as they once did.
Anyway, I think the article is speculative and full of holes, but I appreciate that is offers a more broad perspective that is often missing from my thinking about the role of dividends generally.