Dark side of investing: psychological / behavioral aspects

[plymth]

Dividends are an inefficient and undesirable way of returning value to shareholders.

Interestingly, there is a comprehensive post on the topic on this very forum, here:

Dividends, Buybacks and the art of capital allocation

It is a bit more complicated than that. Furthermore, I see so many questions/assertions about dividends and buybacks that I thought that writing a memo on the topic would be beneficial. So here it is! (Warning, this might be lengthy). Quick definition Dividends and buybacks belong to a set of tools called capital allocation, which describe how the company generates capital, and how it will use it. Sources of capital The company can get capital by several means: operating cash flows taking…