Quote Originally Posted by Crac A Jac View Post
Sounds like a large amount of dead interest money is going out of the loop into the pockets of the lenders, to no gain to MRP; Nothing to lose by getting rid of debt, except the notion that it is always good to have a debt/equity ratio to talk about, and have dividends to talk about. Cut to the chase see the big picture and increase long term shareholder (Kiwisaver?) wealth rather than work your butt off for the bondholder/banker etc paying interest unnecessarily..
Saying you have a manageable debt to equity ratio is a bit meaningless ;debt is for investment, not dividends.Not just talking MRP, but many/most other companies.
But it seems politically incorrect/ not acceptable to the market to not have dividends, which is a bit irrational.
Think about it though; would you borrow money just to pay yourself??
Taken to the extreme, IIRC Hanover Finance directors paid themselves the entire value of the company leaving it with an infinite debt to equity ratio, worked out real well(for some)...
I don't disagree there Crac A Jac but you are fighting a world central bank policy of constant inflation which is beneficial for lenders over the long term provided interest rates stay low. This might come to an end soon and debt will be a noose around everyones neck but sadly we are more likely to see negative interest rates so all those sensible people who have saved and put money aside get killed once again.
Hanover, I think they just paid dividends because their income was growing with growth in interest income which probably jumped as default rates kicked in. As people weren't repaying their loans Hanover's assets would have been growing as well as the interest income was capitalised on existing loans. So all would have been looking good until everyone realised the loans weren't going to be repaid. Sadly the people who would have known about this were busy organising dividends to themselves from the remaining cash available. I could be wrong on this but that how I understood it. The worst thing is the rotten pr**ks got away with it and remain some of our most respected and wealthy individuals. Punishment for white collar crime is a joke. Wasn't Mark Hotchin in the NZ Herald recently?? Sorry a bit off track for the MRP thread.