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  •  Have you heard "Sitting on a Pile of Cash"? (3+ / 0-)
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    elwior, Richard Myers, kaliope

    Recently there has been talk of a lot of companies sitting on piles of cash. When you purchase a company you get not only all of its physical assets but all of the company's money as well. If a company has a million dollars in cash it should be worth at the very least a million dollars. If that company decides to pay out half a million dollars in dividends, it is now worth half a million dollars less then it did before it paid out the money. The current investors have had their share of a half million paid out to them. Well they go to sell the shares they are going to be worth less because those shares no longer include partial ownership in that half a million dollars.

    Normal companies only pay out dividends when they have so much money floating around they really can't figure out any use for it (having it make more money for them) and believe that they are going to continue to make even more money. This is a sign of a fully matured company which has little to no room for growth so it is currently looked down upon by Walls Street. Once upon time it use to be the desired goal for all companies. Healthy dividend paying companies general have very constant rates of payment and those ongoing payments are calculated into its stock price.

    The dividend payout by Clear Channel was not the sign of a mature company. It was a clear sign of a troubled company being looted. It is no surprise that it triggered a huge stock drop as the company not only has less assets but is taking on  additional debt and has left itself with little room to maneuver.

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