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- 2011-7-11
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12#
发表于 2011-10-4 05:44
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Earnings finance dividends. If you have a low earnings yield and a high dividend yield then your payout ratio must be quite high, which signals a lack of organic growth opportunities. It is really a case by case thing though, because I feel far too many companies (particularly traditional "growth" companies, like in tech) have a negative view of issuing dividends because it signals that their growth phase is over. I would rather a corporation be honest with itself about its prospects, rather than continuing to plow money into low return investments. Often it is much better for shareholders if the company would just accept the reality of a business cycle and start paying a dividend.
I often screen on dividend yield before doing further work. I'm going to cherry pick a win for an example of why. Seedrill was yielding 12% in the aftermath of the gulf oil spill, which is an outlier to say the least. Usually when you see something like that you can determine with some cursory work that the the company will need to cut dividends in the future and the yield number is not relevant for the upcoming quarters/year. So, the time investment in pretty minimal. With Seadrill, it looked like they would be able to pay the dividend because their contract pipeline was solid, day rates were long term and their exposure to the gulf was minimal (one rig). Also, while some drillers are starting to now, many did not pay a dividend at that time.
Seadrill's high dividend was a signal of corporate health, which is why dividends can be a useful screen. The negative impact on stock price from a dividend cut is typically more severe than that from reduction of cessation of a share repurchase program. Management knows this so an astute management will only declare a dividend if they are reasonably assured of their company's ability to pay it. |
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