In today’s briefing:
- Companies Unable to Escape the Curse of the Unfortunate History of Misunderstanding “Cost of Equity”
Companies Unable to Escape the Curse of the Unfortunate History of Misunderstanding “Cost of Equity”
- In the past, dividends paid out of net income were often mistakenly regarded as “equity costs.” Consequently, many companies have adopted the concept of payout ratio as their dividend policy.
- The increasing number of companies adopting dividend policy based on DOE may help curb the expansion of shareholders’ equity, but it hasn’t yet led to active use to raise ROE.
- Few managers still understand that entire FCF belongs to shareholders. Due to the unfortunate history of dividends mistakenly viewed as “equity costs,” few companies clearly articulate their cash allocation strategies.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
