Investors’ desire for dividends has long baffled economists. “For stockholders, a dividend payment is merely putting money in one of your pockets by taking it out of another,” argued economist Merton H Miller. A company that pays out dividends will need to raise more funds from loans or bond finance, unless it is changing its investment policy. Mr Miller’s contention is that when investors are preoccupied with a company’s dividend policy, they are actually talking about its financing policy: whether or not it uses outside funds to fuel its growth.
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