[quote=SK in CV][quote=dumbrenter]
I get what you are saying but you are saying two different things:
1. the company RoA estimate is such that they do not think they can beat the increase in tax rates in dividends, hence figure it is better to return shareholder money.
[/quote]
This is kinda what I thought he meant. Hopefully he didn’t. It makes no sense. Individual tax rates have no bearing on a corporation’s internal rate of return.[/quote]
Individual tax rates changes the investor’s perceived value of the company retaining those earnings on assets.
By accelerating disbursements, management is essentially agreeing with the lower value.
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.
