----- Original Message -----
Sent: 7 April 2000 10:25 AM
Subject: [sharechat] Carter Holt
Harvey
. Unfortunatly though there profits don't cover the dividend
payout. Why would a company pay out an unaffordable dividend and again how
much attention should be paid to this ???
Some companies have the policy of
distributing a constant dividend payout, despite inter-year earnings, on the
theory that if shareholders can thus 'bank' on the yearly dividend it will
have a stabilising effect on the shareprice. If the dividend amount is
constant, then years in which the dividend payout is more than profit are
therefore balanced by those years where there are surplus retained earnings
over the distributed amount. Ie, it is simply the company's distribution
policy.
As to how much attention you should pay
to it, I guess that really depends on the individual investor. If the investor
prefers income in the form of dividend streams, then its probably quite
attractive. Those investors, however, who are on the top tax bracket
personally (esp. from now on at 39%) will prefer capital gains on their shares
rather than taxable income streams, thus, such a policy would not be so
attractive.
Regards Mark
Hubbard
See IRG research reports
