A good investment pays shareholders because it increased the future returns and thus the current stock price. A company paying dividends or buying back shares is basically saying we have no better way to invest this money. If they had a better way - they should - and shareholders do benefit more.
Yes, but the argument is more specific: if Cisco had reinvested some profits into 5G, arguably the company would have been even more profitable long-term.
It’s pretty weird 5G is the hill the author of the article choose to die on since Cisco hasn’t ever been a market leader for any sort of mobile base station technology
A lot of people have gotten irrationally 5G-pilled into thinking that being "first" to 5G matters (it doesn't) or that 5G will massively grow carrier revenue (it won't).
5G has a slight chance of turning wired customers into wireless. But look at the big wired carriers and notice that the names are very similar to the big wireless carriers. It just moves customers around, it’s not creating new business.
Isn't Cisco also the arch enemy for telcos as well? Good luck to them with their ATM(not the bank machine) and ISDN and all, and they have since converted to IP, but still.
I've got a very hot take but, the only company who can really make money off 5G is the company that can get base station + support hardware under 5k (ideally under 2.5k) per base
It is all in the price. If you invest and create value in the future, it is in the price today.
The only reason companies are doing buybacks is because it increases the CEO's comp (if you reduce shares, you increase EPS...many bonus packages are based on EPS). If anything it has a negative impact on returns because companies will typically buy back shares when they are overvalued.
I think people assume that there must be a reason why companies are doing all this...there isn't. Companies are run for executives. It was bad ten years ago, since Covid it has reached comedic levels (where you have executives on packages at loss making companies that are meaningful percentages of the company market cap).
I think this is a narrow and old-school view of investing. Generally when a company invests cash flow into R&D it increases the stock price (as the market prices in the future fruits of that R&D). Many investors prefer price appreciation to dividends for tax reasons. If the stock doesn't go up, that's a signal to the company that investors do not want or do not believe that R&D.
Next best, or same thing? Putting money in the hands of investors generally leads to investment.
Dividends and buybacks are sort of an investment into your infrastructure, because the money goes through your investors into investments in the same general area.
Dividends are explicitly not an investment into your company's technology and capability. They're an admission that you cannot invest in yourself with a decent rate of return. Returning money to shareholders in this way is what you do when you cannot grow TAM and cannot grow profits with investment.
The whole concept of a public company is to generate dividends for shareholders. Why invest if there is never any payout for the investment?
Of course this means there is less to invest in R&D, but they got to use that investor money to build the firm earlier.