04-28-2015, 01:10 PM
I wondered aloud over in DividendDream's thread:
On the other hand, does it really make more sense? Some businesses look at expenses as fixed (meaning they have to pay them whether they sell 1 item or a million) versus variable (the costs vary by the quantity they expect to sell). So wouldn't a manager want to know that he has to pay the dividend regardless if the business is going up or down and factor that into their pricing calculations? Afterall, that's one of the bases for calculating prices in a lot of business models. Would certainly please the "owners" of the business to be consistent.
(04-28-2015, 10:01 AM)Kerim Wrote:(04-27-2015, 11:24 PM)Dividend Watcher Wrote: I often wonder how/why the European companies evolved to only paying once or twice a year and often base it on a percentage of earnings whatever they may be. Maybe the better question is how did the North American companies end up paying quarterly for the most part and more seemed to be focussed on a consistently increasing dividend and let the payout ratio fluctuate. Alas, that's a philosophical question for another day.
Why not today?!
I sometimes think that the European model, if that's what we can call it, makes a lot more sense from a corporate perspective. I imagine it would free the company to focus more on the long term health and growth of the company. Paying a fixed amount, as opposed to a percentage, can put a lot of pressure on a company as earnings inevitably fluctuate. Of course this "American" approach has distinct advantages for us dividend growth investors -- it makes our ride much more smooth and predictable.
On the other hand, does it really make more sense? Some businesses look at expenses as fixed (meaning they have to pay them whether they sell 1 item or a million) versus variable (the costs vary by the quantity they expect to sell). So wouldn't a manager want to know that he has to pay the dividend regardless if the business is going up or down and factor that into their pricing calculations? Afterall, that's one of the bases for calculating prices in a lot of business models. Would certainly please the "owners" of the business to be consistent.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan