● The Dividend Imperative: How Dividends Can Narrow the Gap between Main Street and Wall Street
By Daniel Peris
Q&A with author via The Globe and Mail
Q: You show that dividend payout ratios – dividends as a percentage of profits – for S&P 500 companies have fallen to 30 per cent, on average, from 50 per cent three decades ago. Why?
A: There are a lot of reasons. The one that I highlight is the relentless decline in interest rates. A lower interest rate allows companies to get away with offering a lower yield and still attract capital.
Q: And that’s a problem because …?
By taking their dividend payout ratios so low over the past three decades they have made investing in their companies to be a speculative endeavour rather than to be a business investment. To make money, you have to hope to sell the stock for a profit. People no longer view themselves as stakeholders in businesses they use on an everyday basis, but instead as speculators in the stock.
