繼續整理學習美國投資書《終極股息投資攻略》第3章，作者來自美國基金評級公司晨星(Morningstar)。
Sustainable Growth, Meet Achievable Growth
Let's take another look at this formula using United Parcel Service (UPS) as an example. During 2006, UPS earned an ROE of 25 percent, roughly equal to its average over the preceding couple of years. That figure alone tells us that UPS has a tremendous opportunity to grow by retaining a large portion of its earnings to buy more trucks, planes, and distribution centers. If UPS could maintain this 25 percent return on equity and retain all of its earnings, the sustainable growth rate tells us its earnings will grow at a 25 percent annual clip.
But UPS is much too large to maintain a 25 percent growth rate. The company did more than $47 billion worth of sales in 2006 with a global workforce of 428,000 workers; a 25 percent growth rate would oblige UPS to nearly double those figures every three years. In the real world, UPS can't possibly reinvest all of its earnings into the business and translate those retained earnings into 25 percent annual profit growth.But since UPS pays a dividend, its sustainable growth rate is less than 25 percent. If the firm paid out 70 percent of its earnings, the sustainable growth rate falls to a much more realistic 7.5 percent. From this we can draw a very important observation:
The optimal payout ratio for a corporation is one that provides for a realistic rate of growth at a high return on equity, with the rest of profits returned to shareholders.
Still, UPS's dividend in 2007 was running at only about 40 percent of earnings per share--enough to suggest a 15 percent growth rate for earnings that it can't realistically achieve over any meaningful stretch of time. The earnings that (1) aren't paid out as dividends and (2) can't realistically be reinvested in the core business must still be going somewhere.
Indeed they are: acquisitions and share buybacks.
Acquisitions: Growth at Retail PricesA corporate acquisition is the purchase of one business by another business. The assets, liabilities, revenue, and earnings of the acquired business are folded into those of the acquirer. A well-chosen, properly priced acquisition stands to add directly to the earning and dividend-paying power of the acquirer.
However, it's very difficult for companies to earn the same kind of ROEs on acquisitions that they can harvest from their existing operations. The sellers of the acquired company generally have a good idea of what it is worth--and they want to be compensated properly for the profitability and growth potential of their business. Instead of buying growth wholesale (the investment opportunities within a firm's existing operations), acquisitions carry full retail prices.
While 3M, UPS, or Sysco might be able to earn ROEs of 25 percent and up within their existing moat-protected business opportunities, it can be hard to earn even 10 to 15 percent ROEs on acquisitions. Even though the acquirer can often slash the operating costs and better utilize the growth potential of the acquired business, those lofty price tags invariably lead to lower returns. That doesn't necessarily make acquisitions a bad investment of the acquirer's retained earnings, but it's neither as profitable nor as predictable as internally generated growth.
UPS makes acquisitions every now and then (and, frankly, its recent track record is not that great), but these purchases don't absorb much of the firm's retained earnings. Instead, UPS is disposing of the bulk of its retained earnings in another fashion: share buybacks.
Begin with the premise that each share of stock represents an equal portion of ownership in the corporation. If there are 100 shares outstanding and you own 10 shares, then you own 10 percent of the firm. If the corporation buys back and retires 20 shares of stock, then only 80 will remain outstanding. You still have your 10 shares, only now they represent an ownership stake equal to 12.5 percent of the total. If the earnings of this miniature corporation haven't changed, then earnings per share--and with it, dividend-paying capacity on a per-share basis--will also increase by 2.5 percent.
The real world is more complicated. One obvious point is that share buybacks represent an outflow of cash--capital that was probably contributing to earnings in some fashion before the buyback (even if it was simply cash that was earning interest). Share buybacks have become very common in recent years, but the effects on shareholder value relative to cash dividends are not very well understood.
Let's say that UPS is trading at $75 a share, paying dividends of $1.68 out of expected earnings of $4.17 per share--roughly the circumstances of mid-2007.
> Assuming that the company can reinvest 30 percent of its earnings at a 25 percent ROE, total earnings should grow at 7.5 percent annually (25 percent multiplied by 30 percent).> The other 70 percent of earnings ($2.92 a share) is available to split between buybacks and dividends, and we already know that $1.68 is being paid out as dividends.> The remaining earnings--$1.24 a share--can be spent on buybacks.How much stock can the company buy back? At $75 a share, $1.24 a share worth of buybacks is enough to retire 0.017 share for each share outstanding--or 1.7 percent of UPS's total shares outstanding. This reduction in the number of shares outstanding adds directly to UPS's ability to raise its dividend rate. If total earnings are growing at 7.5 percent annually, and UPS buys in 1.7 percent of its stock each year, these buybacks boost UPS's rate of earnings per share growth to 9.2 percent.
The sad reality of buybacks is that they don't increase the total return for shareholders one bit. Consider the scenarios in Figure 3.8.
If UPS paid out all of the earnings it didn't need for investment in its existing operations, it could afford to pay $2.92 a share. That would boost the stock's yield from a so-so 2.2 percent to a handsome 3.9 percent, at least by current standards. However, UPS's dividend growth potential drops by an identical amount: The total return remains unchanged. The same relationship would hold for a much smaller dividend rate: UPS could afford to buy back many more shares and thus increase per-share earnings and dividends faster,but the additional growth is offset precisely by the drop in dividend yield.
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