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Re: skitters post# 203

Friday, 12/15/2006 3:26:04 PM

Friday, December 15, 2006 3:26:04 PM

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is going nowhere even with a .20 divy

This isn't a board for discussing specific stocks. But let me address two financial gimmicks that I see constantly these days. Here are a couple guidelines (not rules!):

1. Paying Dividends
These are essentially an admission by the company that it has no good use for the money.
Reasons companies don't pay dividends
Management and the board may believe that the money is best re-invested into the company: research and development, capital investment, expansion, etc. Proponents suggest that a management eager to return profits to shareholders may have run out of good ideas for the future of the company.

2. Buying Assets
Buying an asset doesn't create wealth. Typically the seller of the asset is doing it to make a profit because he believes that the asset is expensive enough to warrant a sale so that he can invest the money elsewhere.

Both of these gimmicks warrant skepticism but are not necessarily out-right red flags. The reason both of these are gimmicks is that both are just financial schemes rather than anything to do with running an actual business.