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Comment by ucosty | Hacker News Reader

If a company can still afford to pay out dividends it probably isn't really in need of aid.

It's probably a bit more nuanced than that. Dividends are often scheduled months in advance, based on (for instance) last year's profits. Having made a profit last year, and having promised a dividend months before corona doesn't mean you won't be struggling now.

Is the promise of dividends binding? I don’t think so.

To my knowledge, it isn't. There is a date of ownership where the dividend eligibility is determined and then it is paid out a few weeks later. I would imagine those payouts are binding but a planned dividend for June could easily be rescinded without legal penalty. However it is priced into the value of the stock. Slashing dividends will tank the stock price.

C'est la vie.

Eliminating a planned future dividend by itself would have no effect on the stock price. What would affect the stock price is the management explanation that comes along with cancelling the dividend. If they say that profits will drop even more than analysts had expected, then that would tend to cause a share price decline as it would be new information to the market.

Stock prices usually drop after a dividend is payed out because each share now represents a claim on fewer assets.

It's not. The stock price will likely take a hit, but such is life.

So, the business then has the choice to use last year's profits to keep the business afloat or pay investors. Seems like an easy choice unless your only motivation is lining investor pockets.

> lining investor pockets

Investors are often normal people like you and me, using dividends and the sale of shares to put food on their families' tables.

Indeed. The fallacy that all investors are all fat cats, swimming in money is pretty galling. When interest rates on savings accounts dropped, many regular folks took some of their savings and put into dividend paying companies. I'm sure most of them are aware that this is an investment and isn't without risk. I'm certainly not advocating for companies to pay out dividends no matter what. But the lack of nuance bothers me.

Not all dividend paying companies are greedy, and not all dividend investors are wealthy.

I've never once met a person who would otherwise go hungry if they didn't get dividends, have you?

What you really mean is those "normal people" would have to sell their third car or maybe rent out their summer home without that dividend, which is just fine by me.

I know a bunch of retirees who live modestly off of dividend income, couldn’t afford a significant cut and couldn’t easily return to work. I don’t think you have broad enough experience to assume no one earns a few thousand a month from dividends and needs most of it to help pay bills.

A semi-common retirement setup is to buy relatively stable stocks that have good dividends and supply you with a 4-6% annual return.

> I've never once met a person who would otherwise go hungry if they didn't get dividends, have you?

Many pension funds pay pensions by taking a dividend from investments.

If pensions stop paying tons of people will go hungry. What do you think backs these massive programs?

It's actually way simpler than that: the owners of a company facing crisis have the choice between providing it with additional liquidity or putting its future (and thus their stake) at risk. This is the one core manifestation of the risk they are bearing, and for which they allegedly deserve the dividends in the first place.

Getting a dividend for last year's performance is the opposite of providing liquidity. If they get the cash because it was scheduled, they need to immediately put it back. If they take the cash and run, they failed to act in their own interest, and do not deserve to have their investment protected.

Paying a dividend is paying a person. It's like you're saying that 'as long as they can afford to keep paying employees' they don't need aid. Would you rather they stopped paying people but didn't take aid? The whole point of the aid is so they can keep going and keep paying people.

Return from investment is nothing like salary.

Many workers are paid a majority of their income in the form of stock from the company they work for.

Suing your employer for wage theft because

1. They are still paying your salary, and

2. They are still granting you stock, but

3. They have suspended dividends on the shares you were granted

seems like a reach. I'd definitely be interested in reading about it if someone actually tries it, though!

Not sure who you're replying to. I didn't mention suing anyone or any idea of wage theft.

You suggested paying a dividend was similar to paying employees. When throwaway2048 challenged this, you brought up stock-based compensation. Surely if such compensation (including dividends) was an obligation in the same way as wages, then the employee would have some recourse when it's interrupted. In other words, they could sue.

> ...if such compensation (including dividends) was an obligation...

But I don't think it's an obligation. Not sure where you're reading that from what I said.

Sock compensation is often discretionary, and dividend payments as well. Not an obligation.

Then, Like I said, its nothing like salary, which is absolutely an obligation.

> Then, Like I said, its nothing like salary, which is absolutely an obligation.

But I'm never argued it was a salary or an obligation. Literally never used either of those two words. I think you're arguing against something nobody said.

It's money you'd be paying a person. It doesn't matter if it was 'like a salary' or an 'obligation' or not. What difference do you think that would make? Preventing companies paying dividends is prevent them paying people. Real people!

How many as a percentage of workers in the USA? How many of those are earning below 200k a year?

Most workers who receive majority of their income in the form of stock are in a very high income bracket and should not receive any government bailouts directly or indirectly.

> Many workers are paid a majority of their income in the form of stock from the company they work for.

A very small "many." I'd imagine that class consists mostly of highly-placed executives (who can be assumed to be rather wealthy) and some number of people playing the startup lottery.

I think at many large enterprises getting paid in stock is standard for even junior line-worker hires. Google, Microsoft, Amazon, Oracle, etc. People a few years into their career are often paid a majority in stock.

> I think at many large enterprises getting paid in stock is standard for even junior line-worker hires. Google, Microsoft, Amazon, Oracle, etc. People a few years into their career are often paid a majority in stock.

Maybe at FAANG companies (whose FTE workers tend to be very well off) and some other companies with a startup lineage, but I highly doubt this is very widespread.

I, for one, would frankly refuse a compensation package that was majority stock, unless the salary was already good. It'd be too much like those Enron employees who filled their 401ks with Enron stock -- too many eggs in one basket.

If someone who's otherwise well-compensated complains about missing out on dividends on their stock, I have the world's smallest violin here, ready to play a song for them.

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