January 2018 Data Update 9: Dividends, Stock Buybacks and Cash Holdings
aswathdamodaran.substack.com
If success for a farmer is measured by his or her harvest, success in a business, from an investors' standpoint, should be measured by its capacity to return cash flows for its owners. That is not belittling the intermediate steps needed to get there, since to be able to generate these cash flows, businesses have to find ways to treat employees well, satisfy customers and leave society at ease with their existence, but the end game does not change. That is why I find it surprising that when companies pay dividends, or worse still, buy back stock, there are so many who seem to view them as failures. Perhaps, that flows from the misguided view that reinvesting cash is good, not just for the company but also for the economy, because it creates growth and returning cash is bad, because it is somehow wasted, both flawed arguments. A company that reinvests cash in a bad business is destroying value, not adding to it, and as we saw in
January 2018 Data Update 9: Dividends, Stock Buybacks and Cash Holdings
January 2018 Data Update 9: Dividends, Stock…
January 2018 Data Update 9: Dividends, Stock Buybacks and Cash Holdings
If success for a farmer is measured by his or her harvest, success in a business, from an investors' standpoint, should be measured by its capacity to return cash flows for its owners. That is not belittling the intermediate steps needed to get there, since to be able to generate these cash flows, businesses have to find ways to treat employees well, satisfy customers and leave society at ease with their existence, but the end game does not change. That is why I find it surprising that when companies pay dividends, or worse still, buy back stock, there are so many who seem to view them as failures. Perhaps, that flows from the misguided view that reinvesting cash is good, not just for the company but also for the economy, because it creates growth and returning cash is bad, because it is somehow wasted, both flawed arguments. A company that reinvests cash in a bad business is destroying value, not adding to it, and as we saw in