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Kick the dividend habit

Paying a dividend is only one capital allocation choice that companies can make and other options are often better for shareholders regardless of whether their focus is on income or share price growth.
Kick the dividend habit
  • The importance of thinking in terms of total returns
  • Identifying when paying dividend is dangerous
  • Identifying when dividends highlight good opportunities
  • The case for companies reinvesting cash into their businesses
  • The case for companies paying down debt
  • The case for buybacks

Here’s a brain teaser for equity income fans: which income play could have been bought five years ago yielding 4.3 per cent, has provided an annual 17 per cent return on cash reinvested, and has grown its payout by a staggering 350 per cent over the period? 

Struggling for the answer? Given this particular income play has never paid a penny in dividends, it could be considered a trick question – but there are grounds to argue that it shouldn’t be. 

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