Australia’s obsession with dividends is doing you damage

Intelligent Investor

Independent Financial Research

Yield-seeking behaviour is causing some stocks to skyrocket – but starving our businesses of capital. If ever there were a sign that Australian investors are obsessed with dividends, this is it: Cochlear (ASX: COH) posted record sales for 2015 and a 56% rise in net profit – not to mention management expectations for 14%+ growth in 2016 – yet the share price fell 10% following the announcement. Why? Cochlear’s board reduced the full-year dividend by 25%. Of course, in Cochelar's case several other factors were also at play and investor expectations got ahead of themselves, but a broader question remains: Why has everyone gone gaga for dividends? Franking credits make dividends particularly tax friendly in Australia. But imputation has been around for nearly 30 years – it’s not the full story. We suspect the army of retirees now managing their own superannuation are to blame. The number of self-managed super funds has increased from roughly 100,000 in 1999 to over 500,000 today. Read full article (VIEW LINK)


Intelligent Investor
Independent Financial Research

Intelligent Investor is an independent financial research service with a 14-year history of beating the market. Our value investing approach empowers Australians to make more informed decisions to build their long-term wealth. We off structural...

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