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Dividends and the strategy of denial

Adopting an aggressive dividend policy may actually result in denying competitors access to capital. If a New Technological Corporation, by paying dividends, causes relative revaluation of its stock among its industry group peers, conventional competitors whose earnings cannot sustain comparable dividends will undergo relative depreciation. The New Technological Corporation can then use its more valuable stock to acquire technologies, bestowing additional leverage on itself, more cheaply than can its competitors, since their stock is valued less by the market.

Editor: John Walker