Here's an article discussing another article from the Financial Analysts Journal (I haven't read that one, it costs $175/yr to subscribe!)
But the subject is interesting, and Morningstar usually does a good job. It is about dividends vs. reinvested earnings, comparing growth in earnings and GDP. The conclusion is that earnings and GDP grow faster when dividend payout percentages are higher. http://news.morningstar.com/doc/article/0,1,87696,00.html excerpt: Arnott and Asness, two of the most respected scholars in the financial community, ran the numbers, double-checked them, and then ran them again. In the end, they made a surprising discovery: All else equal, earnings grow faster when companies return a higher percentage of earnings back to shareholders as dividends instead of retaining and reinvesting them in growth opportunities. The finding goes against one of the most basic tenets of modern finance theory: that the more earnings companies retain and plow back into their businesses, the faster they'll grow. The authors present a wealth of data to support their conclusions, and even go so far as to compare economy-wide capital expenditures versus the subsequent 10-year growth rate of the U.S. GDP. The conclusion is exactly the same: The more earnings companies reinvest in their businesses, the slower subsequent GDP growth is. What Arnott and Asness have come up with is statistical evidence of a phenomenon many investors already were aware of: Executives do dumb things when there's too much cash lying around. They use the excess cash to overinvest in unattractive projects in pursuit of growth initiatives. They buy this growth using shareholder cash. -- "Erik Reuter" <[EMAIL PROTECTED]> http://www.erikreuter.net/ _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
