[Subscribe to Daily Digest] |
[Main General Bulletin Board | BBFAQ |
Prev by Date | Next by Date | Post Followup ]
Member Login / Signup - Members see fewer ads. - Latest Member Gallery Photos
You can't pay what you don't have Posted by Ari [Email] (#2847) [Profile/Gallery] (more from Ari) on Wed, 25 Jun 2008 12:30:30 In Reply to: Re: "is a good deal for as long as the dividends continue", Caarma [Profile/Gallery] , Wed, 25 Jun 2008 10:45:00 Members do not see ads below this line. - Help Keep This Site Online - Signup |
The most sound fiscal policy is the first rule of holes: When in a hole, Stop digging.
Sure, GM wants to keep the stock price reasonable. But as others have mentioned, a company can only pay dividends if they have money. If they are not selling cars, there is no money coming in. The idea of borrowing money to pay dividends in order to keep the stock price artificially high is not only silly, if it isn't the definition of a Ponzi scheme, it should be.
At some point GM, or any other company, has to decide where to put its limited cash resources. It can either use the (small) cash flow coming in to build more cars to sell and hopefully get even more cash coming in, or it can simply ship the cash out the door in the form of dividends and hope that investors don't notice that cars aren't selling.
Or look at it this way - if paying dividends helps keep the stock price high, and GM has gone from $40 to $12, as Dr. Phil would say - So How's That Working For You?
If you buy GM, buy it as a bet that they'll turn it around. But don't assume they will keep paying dividends if the economy continues to tank.
posted by 192.249....
No Site Registration is Required to Post - Site Membership is optional (Member Features List), but helps to keep the site online
for all Saabers. If the site helps you, please consider helping the site by becoming a member.