As investors have searched for yield and growth in a market where they’re increasingly difficult to find, large-cap stocks have responded by increasing payout ratios at the expense of reinvestment, says Vince Pezzullo, Portfolio Manager at Perpetual Equity Investment Company (ASX:PIC). “The problem with that strategy is that at some point you don’t reinvest in your business, your growth rates will start to roll off.” Telstra has been paying out 90-95% of its earnings for the last 5-years, keeping investors happy with large dividend cheques. Now CapEx needs to be increased by $3bn because “technology has caught up.” If Telstra had instead reinvested a greater portion of its earnings, it would be better placed to defend its market position. “We think there’s been a lack of investment . You have to take some risk.” In the video below, hear Vince’s outlook for large-cap dividends.