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by cmccabe
4620 days ago
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News flash: most technology companies don't really pay dividends. Probably, the main reason is because dividends are taxed at a pretty high rate. It's easier just to keep the money overseas in some tax shelter or other (Apple, Google), or plow it back into the company as investment (Amazon). Microsoft is one of the few tech companies that pays dividends. Spending money on dividends looks like a poor choice. If your share price is sagging, you can always buy back your own shares with part of your cash hoard, like Microsoft did recently. Investors are always willing to believe that your investment will make the stock more valuable because TECHNOLOGY. And if they aren't, who is to guarantee that the stock will have any value at all next year? Cough-- Nortel Networks-- cough. Notice how many tech stocks are in here? http://www.forbes.com/sites/dividend/2011/01/24/10-stocks-th... |
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While its true that lack of profits limit dividends, return on invested capital is measured using other metrics. So the question of dividends "not a news flash", in the sense that it's not central to the topic.
The question of profits, though remains. Three possibilities:
(1) Tax losses & Tax Shields (avoidable, but cash positive)
(2) Obfuscation of earnings (avoidable, but to deter entry)
(3) Stategic operating losses (unavoidable)
_____________
(4) Incompetence (or actual lack of business leverage).
Since no one is really arguing (4) the question is more which of 1-3 is relevant? I don't think avoiding dividends would be a central consideration, but YMMV.