Dividends and buybacks divert cash from R&D and company growth to shareholders either directly through dividends or indirectly through buybacks. Larry Fink, CEO of Blackrock Inc. warns S&P company leaders that this practice sacrifices long-term success for short term gains.
Larry Fink On Corporate Cash Use
BY ROSS KERBER, REUTERS
BlackRock Inc <BLK.N> Chief Executive Laurence Fink has warned top U.S. companies not to emphasize dividends or share buybacks if they come at the expense of future growth.
Many top corporations have faced pressure from Wall Street analysts, activist investors and others to increase their dividends, buy back shares or take other steps to return capital to investors sooner rather than later.
Fink, in a March 21 letter to the leaders of companies in the S&P 500, acknowledged the pressure for near-term performance but reminded companies that they must focus on the longer term. With $4.3 trillion under management at December 31, BlackRock of New York wields much influence over the boards of top corporations.
"It concerns us that, in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies," he wrote in the letter, a copy of which was obtained by Reuters.
Keep reading Larry Fink On Corporate Cash Use – Business Insider.
