 Quote:
Originally Posted by free4now
What clif said.
The whole idea of owning stock (unless you are a speculator) is to get a piece of the company's profits. Except for companies in their growth phase (which I'm not very interested in), they should be earning a profit and returning that profit. If companies just build share price until the day they go bankrupt, never paying a dividend, the shareholder never gets a dime back on their investment. The question any long term shareholder should ask is not IF they will pay a dividend but WHEN.
Even Buffett really should start paying dividends now that they are not so bad taxwise.
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Due to the structure of American tax laws, where capital gains are taxed at lower rates than the high marginal income rates, it's in the best interest of most shareholders to not have income from dividends. Companies are trying to act in the best interest of shareholders when they choose to buy-back stock, which boosts the stock price by reducing the number of shares outstanding (as well as simply sending a signal to markets that the company is doing well). Eventually, mature firms need to start paying out the profits to the shareholders. However, I'm quite happy with them buying back my shares in the meantime.
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