Submitted by lilly_kilgore t3_10phz45 in explainlikeimfive
ThenaCykez t1_j6kkfon wrote
If a company's main owners think it is going to do really well in the future, they'll buy back stock from smaller investors. This allows them to keep more of their profits, instead of having to pay it out in dividends.
Normally, there's nothing wrong with doing that. But often companies today are whining with statements like "It's too hard in this business climate! We need stimulus money! We need tax breaks! We can't afford to raise employee wages! We can't hire full time or provide benefits!"
If they are whining that they need cash / can't provide cash to their workers, and at the same time are reinvesting to maximize their own profits with the money they could have used on their workers, it sounds like blatant hypocrisy.
lilly_kilgore OP t1_j6kkmo8 wrote
Ahhh ok this makes sense. Thank you.
omicrom35 t1_j6ku66c wrote
Correct me if I am wrong but companies have to actively approve dividends each year?
tdscanuck t1_j6kugm2 wrote
Usually the company proposes dividends and their board of directors approves it. From a purely process standpoint, most companies can turn dividends on or off at will (details depend on their exact corporate rules). In practice, investors generally expect dividends to be pretty even over long periods so companies don't like to mess with dividends...once you start doing them, or increase them, it's really hard to stop without a significant stock price hit.
DTux5249 t1_j6kybd1 wrote
Put simply: Correct, in a vacuum where shareholders were bricks with wallets that don't care about getting paid
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