Why U.S. Companies Continue to Pay Dividends
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April 12 (Bloomberg) -- Much has been made of Apple Inc.’srecent decision to begin paying regular dividends, given thecompany’s large free cash flow (about $1 billion a week) andcash balance (close to $100 billion).
Yet, according to finance theory, stock-market investorsshould be indifferent to whether they receive their returns ascash dividends or capital gains. In fact, when dividends are taxdisadvantaged, as was the case until 2003 and may be so againsoon, investors should prefer retention and the resultingcapital gains. This led economists -- notably Fischer Black in1976 -- to describe the payment of dividends as a puzzle.