Liberate the Dividend. (Forward Observer)

By Glassman, James | The American Enterprise, September 2002 | Go to article overview

Liberate the Dividend. (Forward Observer)


Glassman, James, The American Enterprise


Back in March, I testified before a House committee that was looking for ways to prevent Enron-style disasters. Don't bother with more nitpicking accounting rules or changes in pension regulations, I told the members.

Instead, get tough on enforcing the anti-fraud laws already on the books. And do one more thing: End the double-taxation of dividends.

Panel members were baffled, but the connection is really simple. Small investors can't plow through thousands of pages of SEC filings and dozens of footnotes in quarterly statements to determine how a company is really performing. But they can focus on a single number that distills all that information--the dividend.

A dividend is the most transparent and accurate reflection of how a company is doing. You can't easily fudge it because it's real cash out the door, not an accounting entry. And, since companies are extremely reluctant to reduce their dividends, it tends to be a reliable, conservative manifestation of long-term financial health.

Unfortunately, dividends are rapidly disappearing, and the main culprit is the tax code. Making dividends visible would go a long way toward increasing trust in financial reporting and bringing more Americans into the stock market.

A dividend is a distribution of profits that a company makes to its shareholders, typically every three months. A firm might have earnings of $4 million after taxes in a quarter. It keeps $3 million to reinvest in the company or keep in the bank. It sends the remaining $1 million to its investors. If there are 1 million shares outstanding, then each share is assigned a one-dollar dividend.

But here is where it gets tricky: Dividends are again taxed as ordinary income--currently at a top federal rate of about 39 percent, plus state taxes. Consider Maytag, the third-largest appliance maker in the U.S. It earned $2.64 per share last year. The shareholders got just 43 cents of that; governments took $1.16 in taxes; the company kept $1.05 for capital investments or to put in the bank. Maytag's dividend, before all taxes, was $1.07. The tax collectors got three-fifths of the dividend. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Liberate the Dividend. (Forward Observer)
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.