Why It Would Be Unwise For Firms to Boost Dividends
July 27th, 2010
While a dividend increase will often provide a stock “pop” , I believe it would be unwise to expect, and for an enterprise to pay out, substantially increased dividends at this time. For example, I couldn’t disagree more with BP’s statement today of $39 billion in possible asset sales and a commensurate look at reinstating the dividend. Why not liquidate the entire company and pay a huge dividend (payback of capital)? Obviously, BP should not consider dividend resumption until its liabilities are confidently estimated and its maximum growth is unimpaired resulting from a dividend.
