[NovemberWhiskey]

> 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.

You present that as a statement of fact; but it's not at all clear to me why that should be true. Can you give your thinking on that?

A company may not be paying a dividend because it's reinvesting; or because it's unable to do so because it's making a loss.

Do you think Facebook (no dividends; almost completely dependent on advertising budgets) is a less vulnerable, less risky investment than AT&T (regularly pays substantial dividend)?

[Saaster]

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 because the lack of said buffer now makes their company non-viable, at least not without restrictions like the Danes are imposing (no future dividends). To do otherwise incentivizes creating these fragile bufferless companies, and puts companies that do have a buffer at a competitive disadvantage.

What Denmark is doing, is saying you can get some aid to help your company, but going forward you must pay us (the society who supports you) back before you pay your investors. Unfortunately the dividend restriction period is capped at two years, while it should really be for an indefinite time.

[NovemberWhiskey]

> 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: AAPL in its Q1 2020 filing reported ~$200bn of cash, equivalents and marketable securities on hand. AAPL also pays a dividend.

Moreover: it's absolutely not to the benefit of shareholders to have a company fail just in order to pay a dividend (unless the dividend yield is something ridiculous); shareholders are often interested in a combination of growth and yield, and the value of the stock going to zero as the company fails is a bad outcome.

In fact, companies that pay a dividend by definition have a buffer. They can chose not to pay a dividend.

[Saaster]

That was however the intent of the statement: Companies that pay dividends or make share buy-backs are more vulnerable in a crisis [compared to otherwise identical companies who build a cash buffer].

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.

[NovemberWhiskey]

> That was however the intent of the statement: Companies that pay dividends or make share buy-backs are more vulnerable in a crisis [compared to otherwise identical companies who build a cash buffer].

That's a false dichotomy though.

Option three is what, for example, most of the profitable/zero-dividend tech firms do - which is to reinvest to boost market share, perform research and development and enter new businesses instead of returning a dividend to shareholders.

No dividends; but no cash pile either. Under your theory, those companies are no better equipped to deal with a crisis.