Dec 9, 2018
Utility groups’ high dividends are harming Britain’s infrastructure
In theory, companies only pay high dividends as a last resort: when they cannot find more attractive homes for their capital. Then there are self-inflicted high yields, where investors lose confidence in the managers, especially those which seek to diversify steady utility businesses into sexier, faster-growing activities. High dividends have become controversial, especially in essential services such as water and energy. Are high dividends a symptom of something even more insidious? Do they actively damage the quality of the services the public receives? So if high dividends are the problem, what is the answer? Fat payouts tend to flourish in sectors where cash flows are very stable - largely because of the absence of competition.
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