The tax cut will increase the after-tax return on dividend-paying stocks relative to all other assets, including tangible assets like land, commodities and used cars.
Now calculate a real aftertax total return, the sum of the returns on dividends and capital gains.
The Treasury will invest $2.0 billion in the bank, in return for restrictions on dividend payments, stock buybacks and executive compensation.
That means low debt-to-equity ratio, high interest coverage (where interest income substantially exceeds interest expense), increasing revenues and earnings, high return-on-equity and a dividend-payout ratio (earnings-to-dividends paid) no higher than 60% (except for utilities, REITs, and MLPs, which commonly have high payout ratios).
Whatever happened to improving profitability, increasing return on investment, boosting dividends, jettisoning lackadaisical management, resisting deceptive accounting procedures, lobbying for deregulation and tax cuts, devising creative acquisitions and divestments and generating positive excitement in the investing world?
They compared total monthly returns for dividend-paying stocks and non-dividend-paying stocks on the S&P 500 going back to January 1970.
Richard Windsor, formerly of Nomura Research and now running his own Radio Free Mobile consultancy, says it is simpler to think of Apple stock not as equity, but a bond – paying a return (through its dividend) on the investment of buying it.
Willens believes Inland is angling to qualify for a tax benefit called "distribution in partial liquidation," designed to let downsizing companies treat sale proceeds as a return on investment, not a dividend.
The improvement was due to higher income: VAT returns are stronger and levies on dividend income up too.
In addition equity investors expect a return (via dividends or capital gains on their shareholding) of around 12%, compared with the 4% or so demanded by bondholders.This sets up a tension between stability and profitability which banks' bosses must manage.
For long picks, the Ward Ferry team puts a lot of emphasis on such classic numbers as return on equity, free cash flow, dividend yields and price-to-book ratios.
