Not negatives for IDCC's dividend
1. They are not paying stock dividends. Even if they were, it would not cause dilution because everyone gets the same ratios of shares, so your holdings before and after a stock dividend would be the exact same percentage, therefore no dilution. Who ever wrote that is fairly ignorant, and immediately makes me discount any other opinions they might offer.
2. IDCC is NOT typical, which is why I find it such a great investment. It does not need to build plants or open stores to expand. It needs to create IP, which is a fairly stable cost, and license it. Therefore it can grow with limited additional cash requirements. Since growth generates positve cash flow far beyond the need for additional expenses, this is not an issue for IDCC.
3. The good ideas to grow the company are new patents, which they are working on. No capital or other costs needed for that. I LOVE the IDCC business model because of the very small marginal expenses related to sales growth.
4. Yes, the company can cut or stop the dividend at any time, but that negative would only reverse the positive of declaring a dividend. And on the flip side, they can also increase the dividend at any time.
Look at IDCC's cash position, it's ongoing cash receipts from licensing versus the expense run rate, and I see no problem for IDCC to maintain a $1.00 a year dividend for many years to come with only limited additional licensing. If they are successful in getting Nokia and Ericcson licensed and resigning LG, the dividend can be much higher in the future without causing any cash flow problems.
There have been many posts that glorified the dividends. Here are some negatives that I found on internet
1. If the company pays dividends in a form of shares, this will increase the numbers of outstanding shares, further dilution.
2. No more unprecedented growth rate: typically, mature, profitable companies pay dividends. If a company thinks that its own growth opportunities are better than investment opportunities available to shareholders elsewhere, the company should keep the profits and reinvest them into the business. For these reasons, few "growth" companies pay dividends. Eg., the progression of Microsoft through its life cycle demonstrates the relationship between dividends and growth. When Bill Gates' brainchild was a high-flying growth company, it paid no dividends, but reinvested all earnings to fuel further growth. Eventually, this 800-pound software "gorilla" reached a point where it could no longer grow at the unprecedented rate it had maintained for so long. So, instead of rewarding shareholders through capital appreciation, the company began to use dividends and share buybacks as a way of keeping investors interested.
3. Indicate that the company has run out of good ideas for the future growth of the company.
4. Company can cut or stop the dividend at any moments.
