February and March are the busiest months for IR, CFO, and CEO since a fiscal year ends at the end of December for many Japanese companies and they publish their annual report during the following February and March.
I try to read a relevant company’s report as much as I can. In fact, I enjoy reading it a lot. It shows where the company was and where the company is heading in the future. While I was reading it, I stumbled upon a quite interesting comment from the CEO who runs a big Japanese public company.
He said that people who buy a stock just because a company pays dividends are not looking at the core value of the company. According to his theory, these people are willing to make extra money by holding a stock that yields dividends and not willing to re-invest into a company that paid the dividends. That was the reason why his company never paid dividends.
I’m not sure if he really means it, but that’s how it was said during the briefing. Assuming it’s true, I thought this is a very self-oriented way of looking at the stock market.
Every CEO who runs a public company needs to ask himself/herself this question: “Where is this money coming from?” People are buying your company’s stock because they have extra money to spend, and that extra money might come from the dividends paid by other companies.
If your company doesn’t pay dividends, then there is less money going back to stockholders. Hence, there is less money going to other public companies because these stockholders do not have extra money to spend. Simple.
If all CEOs start to think like that, it means the beginning of the market shrink. The amount of money floating within the market becomes less and less over time. You need to give first before you get.
It’s almost irony to see CEOs whose company doesn’t pay dividends are the ones criticizing difficulty of raising money from the stock market. These CEOs say like buying the power of people is weakening or there is an economic winter making stockholder not to buy anything.
Well, think again. That’s because your company is not paying dividends.