THE NEED FOR DIVIDENDS
Many investors today own equities due to a need for income. This has increased the need for dividends. Normally this would be a good thing, but unfortunately it has gone too far. We are increasingly seeing companies lever up their balance sheets to pay dividends or buy back shares.
“The other unintended consequence is the effect of management teams reducing capital expenditures and R&D to fund growing dividends. This works in the short term, but in the long term the companies who do this will lose customers and ultimately fail. We will not invest in such companies with our clients’ money.”