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Will corporations (like S&P 500) increase dividends more than usual?

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  • Will corporations (like S&P 500) increase dividends more than usual?

    Given the new 14% corporate tax cuts...will public companies increase dividends and if so should one market time into equities this year?

  • #2
    For what it's worth, the market saw these tax cuts come, watched them happen, and has now been reacting to them for awhile now.  The tax cuts are hardly insider information and the premiums for these tax cuts are probably already priced into the market to a big extent.

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    • #3
      Those that pay dividends will likely increase them.  Those that do not will likely use the cash to buy machinery, M&A activity, increase compensation, or just store it away for a rainy day.

      As Craigy said, don't market time into equities.  This has been priced in for most of last year.

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      • #4
        Trump said today that 60 companies are using the money to hire, raise pay etc. So that may or may not translate into higher dividends/returns.
        Helping those who wear the white coat get a fair shake on Wall Street since 2011

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        • #5
          It's a good thought, and as I recall JP Morgan put out an investor outlook late last year expecting something similar. But so long as we're speculating, dividend yields and price to earnings ratios are at all time lows in the S&P 500. Stocks aren't exactly bargains right now.

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          • #6
            Ok, stocks have been bid up for several reasons, one of which is the tax cuts.  Repatriation taxation was decreased as well.  Often overlooked is the fact that companies can now deduct capital expenditures immediately rather than depreciating them over time.  This means more spending now on capital, but doesn't directly translate into higher earnings now.  The market changes with expectations.  This is why, as the probability of the bill's passage increased, the stock market increased to the point of its passage a tax which time the market did nothing.  Expectations were fully baked in.  Sure, other reasons account for the stock increases as well.

            As it pertains to dividends and P/E ratios, prices are higher because of expectations.  That's the numerator.  E (earnings) are obligated to increase due to tax reduction in a broad sense, but this occurs over the next 4 quarters at which time you'd expect, all else equal, for the trailing P/E to be more normal.  Yields are low for this very reason as well.  Companies will make their own decisions as to offer dividends, how much to increase, or if to increase.  Ideally this would be based on the relationship between the cost of capital for a given project and the returns on that project (r
            And to your last question, don't time the market.  Invest regularly per your asset allocation.

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            • #7




              Those that pay dividends will likely increase them.  Those that do not will likely use the cash to buy machinery, M&A activity, increase compensation, or just store it away for a rainy day.

              As Craigy said, don’t market time into equities.  This has been priced in for most of last year.
              Click to expand...


              They will buy back stock and increase bonuses almost certainly. M/A may increase. Priced in, possibly, not fully likely. Once it get priced in it becomes the new anchor. If this starts being super obvious on the bottom line, prices will rise.

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