- It’s human nature to like immediate compensation. When it comes in the form of a dividend, even better.
- However, there are far more disadvantages than advantages. Dividends are another indication of how irrational markets are.
- We can’t even imagine what Microsoft or Apple would look like if their cash had been reinvested and not used for repurchases or dividends.
When a company announces increased buybacks or hikes its dividend, the market usually reacts very positively. However, there are some people that aren’t so enthusiastic about dividends and especially buybacks as they see the former as a poor allocation of the company’s cash and the later as a fast way to destroy shareholder value. In this article, we’ll analyze why dividends aren’t as good as they seem at first sight. More →