From: gts (gts@optexinc.com)
Date: Wed Sep 11 2002 - 21:41:17 MDT
Lee Daniel Crocker wrote:
> You're comparing apples and oranges here: dividends are the
> /means/by which /publicly owned/ companies distribute profits to
> their owners. If they only made profits and kept them in the bank,
> there'd be no reason to own the stock.
That is not true. Profitable companies that pay no dividends grow in
value, usually through reinvesting those profits into more profitable
ventures.
Keep in mind that even multi-billion dollar corporations can be
purchased by other corporations. The buying corporation seeks to
increase its profits by subsuming the profits of the target corporation.
Its motivation is no different from that of the individual who buys a
corner grocery store. This means there is always a market for shares in
profitable non-dividend paying companies.
> The directors of a publicly held
> company /cannot/ take profits directly. They have a legal fiduciary
> responsibility to manage the company's assets on behalf of the
> shareholders, for their benefit, and to distribute its profits to
> them as dividends (eventually).
Sorry but you are totally mistaken. The board of directors has no
obligation to pay dividends to shareholders at any time. They are
obligated only to see that the company is managed well to the benefit of
the shareholders, i.e., "to enhance shareholder value". In the case of
non-dividend growth companies, their objective is to increase the share
price by increasing profits.
-gts
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