BULLS & BEARS: Some companies lose way when they reinvest profits
In a previous column, I described “free cash flow” as the earnings remaining after a company makes the necessary expenditures to keep the business viable in its industry. Executives at companies that generate unrestricted earnings, or free cash flow, have critical decisions to make on how to allocate those funds. One choice is to pay out dividends to shareholders. Decades ago, dividends composed a significant portion of the overall return achieved by investing in common stocks. Following the post-WWII economic…