/biz/ - Business & Finance

>>22585929
Your thinking is flawed - it's too universal. Let's take a company like XOM for example.

XOM makes a fucking SHIT TON of cash from its continuing operations. It is a market giant and it spends huge amounts of its income in investing in new revenue streams. However, due to the nature of the business, there isn't really but so much you can actually spend on CAPEX before you start just throwing away cash on projects that will not yield a very good return. In this specific scenario, it makes a lot of sense for them to return their extra cash to shareholders (let's ignore the fact that they're going into debt to pay it right now, temporary market conditions notwithstanding.)

Another example: take a company like AAPL. AAPL has been sitting on an absolutely massive pile of cash for a long, long time now. Now, AAPL does pay a small dividend, but it's trivial. I'm pretty bearish on tech, but I think there's a pretty strong case to be made that AAPL literally *can't* grow that much larger in its current market segment. It's completely saturated the global market with phones and has a loyal (but stagnant) base of customers that are brand loyal to their computer products. IMO, it would be better to return that value to shareholders than just sit on its cash forever, assuming that AAPL is not having trouble with R&D (it doesn't appear they do.) It's just literally sitting around doing nothing.

Another thing - it's not always a straight up choice between dividends or growth. Take a company like TSM - TSM is an absolute monster for growth. Its revenue growth is fucking insane, and it puts a massive amount of CAPEX into cutting edge chip fab. And it still manages to pay a pretty sweet dividend.

This universalist thinking on dividends really doesn't make sense to me. You have to make a judgment call for each specific company - saying "dividends cut into growth" just isn't true, especially when you're talking about megacap companies.