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by onemoreact 5357 days ago
Any graph that ignores dividends is useless for comparing companies over time. Unfortuantatly, you normaly pay taxes on dividends so there is no simple way to add them back into the stock price. Which, IMO is why it's best to compare earnings not stock price.
1 comments
meric 5356 days ago
US should implement dividend imputation. With it, dividends are no longer taxed at both the company level and the share holder level - they are taxed only in the latter. How it works is when a company pays a dividend, it is counted as taxable income as normal; then, the shareholder will be able to claim back the part of the dividend the company has already paid tax on.

When a share market lacks dividend imputation, few companies pay a dividend, and rather resort to "share buy backs". Shareholders then are encouraged to aim for profit from capital gains (share price rising), rather than passive investment (collecting dividends). Implementing dividend imputation will neutralize this effect.

See http://en.wikipedia.org/wiki/Dividend_imputation laws

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bitdiddle 5355 days ago
Interesting, I need to read up on this. I would have thought compensation plans are what drive share buyback programs rather than the tax handling of dividends. Thanks!
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meric 5355 days ago
>> compensation plans are what drive share buyback programs

Sometimes, but without dividend imputation you really can't tell, both shareholders & employees who are affected by these compensation plans based on stock price, are incentivised to pay out profits via share buybacks as opposed to dividends.

In Australia, where there is dividend imputation, you still sometimes see companies do share buy backs, (that could be driven by compensation), but mostly you see many large established companies paying out 50% or more of their profits as dividends.

Here is a very large (in Australian terms) company that pay out around $1.3 of dividend a year and whose price is $13.90. http://au.finance.yahoo.com/q?s=qbe.ax&ql=1 (I'm not advocating anyone to buy it. It is an insurance company very exposed to the US economy & also recent natural disasters. )

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