10-06-2013, 06:39 PM
Here is a pretty interesting review/article in the Economist about a new book arguing that while business profits are soaring, new business investment is very low. Arguably good news for dividend growth investors (though perhaps in the short-term only) is that "businesses are handing cash back to shareholders." The bad news is that the focus on buy-backs comes at the expense of long-term planning and investing in the future of the business, and results from short-term focus on quarterly EPS and share price performance. Worse still,
Thoughts?
Quote:according to the national accounts, American companies have been paying out in cash more than 100% of their domestic profits to shareholders. If profits have been overstated, so therefore has the net worth of companies. For all the talk of deleveraging, there is barely a sign in the national accounts of a fall in the ratio of non-financial corporate debt to GDP. As a result, the dangers of high debt are underestimated. A collapse in asset prices could still provoke a crisis.
Thoughts?