201–210 of 308 posts
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Companies that pay dividends What’s the point of a company that never pays a dividend.
Berkshire Hathaway has only paid 1 dividend ever (in 1967). Buffett can invest that money better than I can, so why bother taking money out of the company.
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> lining investor pockets Investors are often normal people like you and me, using dividends and the sale of shares to put food on their families' tables.
I've never once met a person who would otherwise go hungry if they didn't get dividends, have you? What you really mean is those "normal people" would have to sell their third car or maybe rent out their summer home without that dividend, which is just fine by me.
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> Why should tax payers bail out a tax avoiding company? I think that depends on our answer to the prior question, "Why should tax payers bail out any company?" If the answer is "because we like them and we feel a patriotic/moral/righteous duty to help them", then the distinction between tax-paying and tax-avoiding companies does seem relevant. But if the answer is "to help workers keep their jobs", then the distinct…
There is some truth to that line of thought. Either it is legal to avoid taxes, then no distinction should be made. Or it is illegal, in which they should be persecuted. But making this distinction as a means to "punish" certain companies seems to conflate two unrelated issues.
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>so why should taxpayers face all the risk and none of the reward. Simple, bail the companies out (thus saving all the jobs), but wipe out (or significantly dilute) existing shareholders.
The problem then comes (regrettably) when national/regional/local government next tries to get another round of capital-intensive fixed investment form the captains of industry. They find themselves talking to themselves for the money. They hate that.
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Companies that intentionally run with razor-thin balance sheets and don't have any buffers built in to withstand shocks, are more fragile than companies with some buffer, all other things being equal. If the company chooses to pay out said buffer as dividends, it's to the benefit of shareholders. That's completely fine, market working as intended! But they shouldn't then be able to turn around and get state aid becau…
> Companies that intentionally run with razor-thin balance sheets and don't have any buffers built in to withstands shocks, are more fragile than companies with some buffer, all other things being equal. That's true; but it's not at all the statement you made originally, is it? Do you actually have some data that suggests that dividend-paying companies are more likely to be run as you described? Contrary example: AAP…
I disagree that companies that pay a dividend by definition have a buffer. If the income plummets (like in non-essential retail at the moment), they have no hypothetical dividend buffer to fall back on, that if not paid out would keep them in business.
Danish lawyer here. The proposal only limits payments to companies that have received more than DKK 60 million (around EUR 8 million) in aid. So this is not your usual business owner. These are generally larger companies with a well paid management. As for companies registered in tax havens, the EU has made an official list of tax havens, which will be followed: https://en.wikipedia.org/wiki/European_Union_tax_haven_…
So, companies acting completely legally by seeking to minimize their tax burden, which serves to further maximize the money available for their owners, get penalized. Likewise, companies acting completely ethically, by returning much of their profit to their shareholders via dividends instead of hoarding it themselves get penalized. And this gets celebrated?
> So, companies acting completely legally by seeking to minimize their tax burden, which serves to further maximize the money available for their owners, get penalized
It's fairly simple. If you don't want to pay the government, the government doesn't want to pay you. Just as you are acting legally in tax avoidance, they are acting legally in not bailing you out.
> Likewise, companies acting completely ethically, by returning much of their profit to their shareholders via dividends instead of hoarding it themselves get penalized.
This did strike me as strange, but there are several interpretations. As an example, if you're doing well enough to be paying dividends, you don't need to be bailed out.
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Bailouts are a reward. Not getting a reward is not a punishment. If you buy a lottery ticket and win, your neighbor was not punished for not buying a ticket.
The point I'm trying to drive at is that bailouts are not a reward. If they were a reward, we wouldn't wait until emergencies to issue them. Rather, they're an emergency response, and in that sense they should really be optimized for effectively addressing the emergency, regardless of what feels fair.
It's a good common sense start. Companies that pay dividends or make share buy-backs are more vulnerable in a crisis (not only the current one), meaning they are riskier investments. Risk needs to be inversely correlated with reward for the markets to function. Investors in riskier companies deserve to get wiped out, not propped up. Companies registered in tax-havens should have no business applying for EU or US aid.…
> Companies that pay dividends or make share buy-backs are more vulnerable in a crisis All public companies are anticipated to pay dividends or buy-back at some point in time, it's what underlies stock pricing.
I don't know the specifics of the Danish case, but in other places, they're not saying you should never do these things - only that you don't do it for a fixed period of time if you want bailout money.
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Bailouts are a reward. Not getting a reward is not a punishment. If you buy a lottery ticket and win, your neighbor was not punished for not buying a ticket.
The point I'm trying to drive at is that bailouts are not a reward. If they were a reward, we wouldn't wait until emergencies to issue them. Rather, they're an emergency response, and in that sense they should really be optimized for effectively addressing the emergency, regardless of what feels fair.
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> Why should tax payers bail out a tax avoiding company? I think that depends on our answer to the prior question, "Why should tax payers bail out any company?" If the answer is "because we like them and we feel a patriotic/moral/righteous duty to help them", then the distinction between tax-paying and tax-avoiding companies does seem relevant. But if the answer is "to help workers keep their jobs", then the distinct…
The government has unilateral ability to invent jobs and even invent money if the goal is to help workers keep their jobs and/or remain fed and housed. So I feel that no company should get a bailout. If they fail, they fail, and the government can scoop up the workers and create an agency or just government-staked company that does the same thing, find some work in the country that needs doing and put the workers on…
There's also a large cost to having people reallocate from one job to another, and from having businesses go under. There's physical capital that needs to be reallocated and "organizational" capital (not sure the right word, but I mean the way the business is organized) that may be permanently lost.