Goldman Sees Big Disconnect In Market Pricing For Dividends
Goldman thinks the market might be too pessimistic on the outlook for dividends.
Obviously, the pandemic forced corporate management teams to reassess their priorities around spending, including and especially buybacks and payouts.
COVID-19 represented an existential economic threat, and briefly plunged the world into a literal depression for the first time in a century. For a month or two, folks were asking somewhat metaphysical questions.
I often quote myself on that point, and I'll do so a
Those fading Goldman forecasts have tended to be on the right side of history. Of course, they did get the dollar short right, but so did 99% of the rest of the world. Color me skeptical
“… all you need to do is ensure the rate of return on your capital exceeds the growth rate.” I’m not sure I have ever seen anyone actually make this point in print. For many years it has bothered me that we just seem to assume that stock returns will exceed growth rates. Why? No law I can see.
If you’re interested, Piketty’s entire tome “Capital in the Twenty-First Century” goes through the history of this relationship in incredible detail. In summary, r > g for the past 200 years, except during the two world wars and part of the broadly prosperous Trente Glorieuses (when the peace dividend and negative real rates created the middle class), before reverting back to the general pattern.