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Dividend vs investment


maximus1987/lou99
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How do wireless companies decide the split between dividends and investments?

As a reference, TDS/USM said:

On its Q2 earnings call, TDS' executives outlined a 75%-25% split in deploying capital; 75% would go towards investments in the business, both organic and inorganic, and the remaining 25% would be returned to shareholders, via both buybacks and dividends

http://m.seekingalpha.com/article/1605492

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A company will invest their money if they believe there is opportunity to grow the company and/or expand their market share.

 

A company will return money to investors via buybacks and/or dividends if they have no better use for the money and/or shareholders expect periodic income from their investment (stock) in the company.

 

Sprint has had terrible losses of money over the past ~7 years, so they distribute no dividends. Lots of their (borrowed) money go towards investment, such as Network Vision.

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They spin the wheel of fortune, read tea leaves, or rely on voodoo.

 

AJ

Frankly, I've always found voodoo to be the most inexact of the methods of the science of fortune telling. A direct binary stream of the universe works much better. Ah, if only Fate was as easily parsed as XML...

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This is a balance between firm growth and ownership loyalty. 

 

One hand, a firm needs to keep growing in an efficient and effective manner to spur revenue growth.

 

However, depending on the stockholders, return of equity is required in one way or the other (i.e., dividends, stock splits or stock price growth).

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What they said :-) Plus the ownership structure of the company plays a part, or more accurately if a significant number of shares are held by rich individuals who wish to make a quick buck. If a company is basically proffitable but has previously been over valued and or is seeing it's share price drop like a hoores droors then there is an incentive for 'vultures' to buy a big enough stake in the company to have sway and force the company to distribute any 'warchest' and have the company borrow and return all that to the shareholders. Dell and Apple are recent examples. The short term attraction drives up the price long enough for the original vulture to sell their shares and make off with the bounty leaving a house of cards behind them.

IBM have been returning value for more conventional reasons mentioned above plus there is a hint of CEO pride, they want a stock split. It's basically some kind of tradition where they get a cookie or something as a reward. When the stock gets so high in price they split each share and reissue so the price per share is more manageable, although I think Buffets company BH run two issues at once with one being a silly price and another more manageable.

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