CHAPTER 6
Dividends and the Case for Returning Excess Capital to Shareholders
If you were to ask a CFO or CEO why she was not returning more capital to shareholders, you would likely get one or more of the following answers:
• We have significant opportunities to invest that will generate returns for shareholders well above our cost of capital.
• Returning excess capital to shareholders means that we as executives have failed to find enough attractive, high-return projects for investment. Investors and our board will view this negatively. It is a sign we are giving up.
• Returning excess capital to shareholders is a signal to the market that we are no longer a growth company. If we return excess capital to shareholders, our valuation multiple ...
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