Individual tax rates changes the investor’s perceived value of the company retaining those earnings on assets.[/quote]
If the higher individual tax rate on dividends occurs, it will be more cost effective to retain the earnings in the future.
[quote=no_such_reality]By accelerating disbursements, management is essentially agreeing with the lower value.[/quote]
I think accelerating the dividends beyond a few quarters acknowledges that these companies have retained more than was needed for operations and current expansion plans. It says nothing about the future. As noted, because the rates at the individual level are anticipated to be higher for dividends than capital gains, in the future retention of the earnings may be the more effective strategy.
[quote=no_such_reality]Management is admitting that their planned growth from the additional asset (cash) investment will be worth less to the investor in year than having the cash today.[/quote]
I dont think any such claim can be made about the future. Dividends may be worth more to the investor today than a year from now, but solely based on the tax considerations, the value of cash availability to the company is unlikely to change. It’s an acknowledgment, at most, of a lack of concern for shareholders in the past.
The acceleration of the dividends is a pure tax play for stockholders.
