Via PriSim: Dividends and Buybacks-A Symptom of Short Termism

Is the dividend/buyback glass half-empty or half-full?

Defenders of dividends and buybacks point out the value returned to shareholders when there are few other investment options. Critics argue for using the cash to build a stronger business for the long term.

A recent study by the Boston Consulting Group supports the critics’ viewpoint. Their research suggests that companies that maintain short-term shareholder returns by “cutting costs, increasing dividends, and pursuing share buybacks” do less well over the long term.

And a recent article in Business Insider describes one investor that is pressuring companies to look to the long term – and it just happens to be the world’s largest asset manager, BlackRock.

So as Capital One asks: what’s in your wallet? And what are you going to do with it?

PriSim Business War Games Inc. runs and designs customized business simulations that teach decision-makers about business, strategy, finance, and leadership.

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