mabinda.com Business, Education, Technology Commentary.

A lot of companies that are making multi billions in profit aren’t paying enough dividends to shareholders. It’s all good to hedge your bets in wanting a hefty cash pile, but not paying dividends for years on end is going against the very essence of capitalism. So, really, shareholders are only going to get value in the appreciation of the stock value? Most companies used to pay only about a half of the profits, and legendary investors such as Warren Buffett actively invest in companies that usually pay out dividends to companies. An investor in a company gains in two ways, when the stock price appreciates, and when the company pays out dividends.

That’s why we need activist investors. For instance, Apple has a cash pile of over $300 billion dollars, the size of 15 Olympic size swimming pools, money that even rich countries can only dream of. Won’t this money then be used to pay off shareholders in dividends after hedging off the best of the company such as need to expand investments. Activist investors thus need to increase so companies pay off dividends in time, and fulfil their obligations. An investor such as Icann really had been advocating for top companies to pay dividends, and if a company isn’t able to pay investors dividends, why should we invest in it?

At a time when startups are being valued at a hundred times the revenue value, it used to be ten times, that means Google’s a trillion dollars in valuation is almost 12 times the revenues it generated in 2023, $84 billion dollars. Companies are being valued at a billion dollars when they have not even made a profit, sometimes not even made any revenues, and even wildly, when they are just an idea on paper. The crazy valuations are distorting the valuation market and that’s why venture capital money is sustaining some of the big companies such as Uber. Speculation alone can’t be the way to make money off the big companies, they have to pay dividends.

Of course, the idea of valuation of companies is another issue altogether. Almost no one heard of the billion dollar farm, but if it existed, it could practically employ the whole world. Then, came the billion dollar factory, which employed about 20,000 people, all the way from the grade two drop out to the high flying doctorate holder, and it paid taxes to the local town and created the prosperous middle class of the 50s through to the 70s. In fact, when you account for inflation, the average standard of living of the American has gone down. Then came the billion dollar software company which employed just 500 people all of them Uber Private college and flagship state university graduates. And this is when high school and community college graduates started being left behind. Then finally came the billion dollar startup that employs just ten workers, all of them Ivy Leaguers. And then finally will come the trillion dollar robotics company that will be owner manager alone, and will wipe out the middle class and create just two classes, either you are a billionaire or a pauper, nothing in between.