Maximising Shareholder Returns: Sucking the lifeblood out of the economy for over a decade.

The columnist of a recent FT article wrote: "Even before the pandemic, there were concerns that dividend payments at some companies and in some sectors were unsustainable. The fear was businesses were paying out hefty dividends to keep shareholders happy even as this strategy increasingly ate into cash buffers".

"In some cases, payout ratios, a measure of dividends compared with total earnings, were well above 50 per cent, including at Shell, HSBC and BP. Duncan Lamont, head of research and analytics at Schroders, the UK’s largest listed fund asset manager, said the pandemic prompted conversations about the need for companies to reset dividends to “something that is more sustainable in the long term”.

This was interesting to read in the context of the recent article I wrote about 93% of earnings by S&P companies over the last decade being paid out as dividends or share buybacks, a period during which US investment in R&D increased 39%, compared to China's 10x increase. It is becoming clear already that Maximising Shareholder Value, financed by debt in many cases, has been sucking the lifeblood out of developed economies (the US and the UK in particular) for more than a decade.


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