Before i begin, please don’t mistake me for being cynical, rather see me as exploring while i learn more about this world of business.
The past couple of weeks I have been attempting to find the ins-and-outs of why a business is structured not to pay dividends, but rather lucrative employee benefits.
It makes perfect sense to re-invest into the business and in so doing hold off from paying dividends. (this could be for 3-5-10 years). And i would be happy as an investor with this business model.
However, one could be critical to see ’employee’ benefit schemes as a veil to enrich the top of the pyramid (quite genius really).
While directors and other execs are using their own chartered super-funds for 40% pre tax benefits with stock options and various other benefits trailing for years.
The other thing i noticed is when a business is going to lender market for a loan, it tends to pay returns on the loan to the bank, rather than trying to raise funds solely through investor programs.
So once again, the banks get there cut within a relatively short period, but the millions raised by ‘retail’ investors get nothing, except for one day selling their holdings at a higher price than what they purchased them at, which doesn’t match the ROI the bank made (considering current cash rate, and banks creative way of using credit).
Does any one know of any businesses that at one time didn’t pay dividends (purpose to grow) then selected to start paying dividends?
Or is it standard practice to continue business not paying dividends (like what old man Trillionaire Buffet does with his business )