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Author: Ringfinger Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75642  
Subject: Re: Stocks with dividends Date: 10/12/2000 1:07 PM
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Well, you bring up a point that I once pondered.

Let's look at it from a basic accounting standpoint:

Assets=37,000

Liabilities:
Accounts Payable=36,000
Dividends Payable=500

Shareholders Equity=500

Okay, now the company that reinvests dividends:

Assets=37,000
Liabilities:
Accounts Payable=36,000

Shareholders Equity=1,000

I know that my illustration is ver rudimentary, and is flawed in logic possibly. Just look at it this way, if a company is not paying a dividend, they are reinvesting in the company giving a grater value to the company while not incurring the dividend payable liability.

I hope that helps. Bottom line, it is a wash, you just end up not paying taxes yearly on the dividend.
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