5 -year comparison UPS vs FDX

[tonyexpress]

Today's UPS price change: 0.59
Today's increase in dividend annualized for 2007 .16
------------------------- ------------------------ -------
Net increase in value per share after 1 day including 0.43
annualized dividend increase

I'd say the bad news outweighed the good news just for today.

Buying back shares is meaningless. To buy back the shares, the company "gives" money to the shareholder it is buying the shares from. Now the company has more shares and less money.

When a company such as UPS is cash rich, and UPS is cash rich, it can do three things with the money.

1) Invest the money in itself, like develop a new productivity system, say, PAS, or replacing old equipment (are there any DC8's left).
2) It can buy back shares.
3) It can pay out the cash as a dividend. It is my understanding that the BOD a couple of years ago was discussing a large one time dividend to reward the shareholders because there was so much cash on hand. Never happened, or more likely, it was a false rumor. UPS can raise the dividend .04 / quarter if wanted to for a long time. However, I suspect that more investments in itself , like PAS, are in the offing.

May the Schwartz (not a person named Schwartz, Cheryl, but simply referring to my avatar), may the Schwartz resign. FP

Long term baby, not just looking at today.

Growth per share

When a company reduces the amount of shares outstanding by buying shares back each of the shares becomes more valuable and represents a greater percentage of equity in the company.

When looking for companies to buy when building a portfolio one should seek out businesses that engage in these sorts of pro-shareholder practices and hold on to them as long as the fundamentals remain sound.

A headline in 2004 from another great company:

Microsoft's $75 billion cash reward
Software giant sets $30B buyback and $3 a share special payout, doubles dividend; stock soars.

From this article we see mostly positive results from stock buybacks.

A Breakdown Of Stock Buybacks

 

[squeekywheel]

Financial Planner, the dividend tax rate was extended from 2008 to 2010. Then it will expire. (Congress Passes the Tax Increase Prevention and Reconciliation Act of 2005)

Still have to agree with your general assesment of the investment results. Over the last 2 years, the company has retired about 5% of the outstanding shares reducing the total paid out in dividends by a similar amount. This needs to be considered when looking at the true amount of dividend increase.

 

[tieguy]

Tony,

Did you read the article? The dividend treatment is temporary.
The New, Lower Tax on Dividends

From above:

Sunset provisions
As with virtually all of the provisions of the 2003 tax act, the lower tax rates on dividend income will expire at the end of 2008. That means, unless made permanent by some future Congress, these new provisions will fade into the sunset, and the rules on the taxation of dividends will revert back to the old rules (ordinary income taxed at your normal tax rate).

I understand buffets point about the double tax however I as an individual investor find the following:

a) collect a dividend I pay a tax

b) sell the stock and I pay a tax

Either way I pay a tax.

 

[Dfigtree]

I understand buffets point about the double tax however I as an individual investor find the following:

a) collect a dividend I pay a tax

b) sell the stock and I pay a tax

Either way I pay a tax.

c) have a large estate you pay a tax. A big mother tax if you don't plan. There are taxes and there are taxes.

 

[Dfigtree]

Financial Planner, the dividend tax rate was extended from 2008 to 2010. Then it will expire. (Congress Passes the Tax Increase Prevention and Reconciliation Act of 2005)

Still have to agree with your general assesment of the investment results. Over the last 2 years, the company has retired about 5% of the outstanding shares reducing the total paid out in dividends by a similar amount. This needs to be considered when looking at the true amount of dividend increase.

Damn. Somebody's actually reading my posts.

Thanks for the correction. In researching your response I found this.

"Democrats opposed the legislation, saying the tax cuts on dividends and capital gains are mostly benefiting wealthy Americans." Does that mean the Democratic Party does not represent wealthy Americans. I know the Kennedy's are poor, but how 'bout the Clintons?

And, this.

"In order to pay for these tax breaks, Congress had to come up with clever tax hikes to pay for the cuts." Hmmmm, kinda speaks for itself.

Thanks again.

 

[satellitedriver]

SatelliteDriver,

Can you provide the URL of that link?

FP

I was refering to the link in your post not a finacial planner link. Sorry about any confusion.