Clienteles, and again this is another name for shareholders, and we can use shareholders, we can use clienteles it doesn't really make any difference. When we think about David and policy with, sometimes we think in terms of clienteles, but you can perfectly think in terms of shareholders. You have to ask two questions. Number one is, what our shareholders are expecting? Because if we don't give them what they expect, they may react an if we give them less than they expect or none of what they expect, they may actually drive the price down. And no manager likes to see that, so that's one of the conditions that we need to take into account. We need to figure out, what our shareholders, what our clientele is expecting? But there's another aspect of that, and the other aspect of that is one thing is what your shareholders expect. And another thing is, whether you want to deliver what shareholders expect. One of the things that I do in corporate finance is to use an old case. It's all, but it's interesting because of the point in time, which is Telefonica and that is the main telecommunications company, Spain. The biggest telecommunication companies in Spain back in the early 90s. They had a CEO that was very much set on growing the company in Latin America in different sectors. And he could actually, he wanted to get all the money possible into those growth opportunities. Telefonica as many other telecommunication companies, particularly in Europe were known for paying a large proportion of their earnings out as dividend. Roughly, 50% of the earnings of Telefonica year in and year out, they were paid out as dividends. But then, they come into this point in time when the telecommunication companies are deregulating, the Latin American market is reader deregulating. New markets are appearing, mobile or cell phones, internet access, video, all sorts of things that telecommunication companies could actually offer and therefore the CEO has these decisions to make. We have great investment opportunities. We know that people expect to pay a dividend, should we pay or not pay? Should we pay more? Should we pay less but part of that decision is do we really do? Do we really want to do what our shareholders want us to do? Or should we actually use the dividend and policy to target the type of clientele that understands where we're going? So if you have a typically all shareholders or pension funds are expecting a dividend. Well, if you want to be a growth companies, if you want to grow very aggressively, that may not be the type of shareholders you want to have. And so, if you signal that you want to be a growth company, then that may change the composition of the shareholders. So you can either bow to what the shareholders want and deliver that, or you can use your dividend policy to target a specific clientele. I don't want the people that are going to demand dividend for me, I want the people that understand that when there's a growth opportunity, I'm going to use the money to invest in that. So these are two things that you have to take into account when you think about your shareholders. Would they expect number one and whether or not you're going to deliver what they expect, or else you're going to use your dividend policy to target a specific type of clientele. Growth opportunities are a critical part of this. Because, again, if you don't have any growth opportunities and you are making money, then it's kind of natural that you pay out some of that money in terms of dividends. Now, on the flip side, if you have fantastic investment opportunities and you're making money now, that opens a question. Do I want to pay dividends or do I really want to invest back in my company? This is what Amazon does all the time and it's been completely clear, but their policy were going to be reinvesting every penny that we make back into the company. Because what we want is to grow more and more and more. Now, that was what Microsoft did back in the day, that was what Apple did back in the day. That was what Cisco did back in the day. But eventually, some companies reach a point in which they stop growing aggressively, and they're generating a lot of money. So most of them eventually end up paying dividends, that was a case of Microsoft. They had never paid a dividend up until 1993, and from that point onward, they started paying a dividend, they never stop. Well, because Microsoft growth opportunities are where much more aggressive in the early part of the company than they could be today. All the Microsoft is doing fantastically well, under the new, not new anymore and the Satin Adela as CEO. But be that as it may, those growth opportunities whether you have them or not, how good they are or not are going to be a critical determinant of how much dividend if any, you're going to pay now. In general, we tend to think, but there's a but, as you see and I'll get to the but in just a second. In general, you tend to think that if a company doesn't pay a dollar and put it back into the company, then the company is going to grow more in principle, yes, but will get back to that in just a second. For now, let me just show you a couple of things about these number one. This is Berkshire Hathaway, Berkshire Hathaway for the last 40 or 45 years has never paid a dividend. And Warren Buffett has been crystal clear that he doesn't have any intention of paying a dividend. He thinks that every penny that the company makes is better invested, putting it back in the company then paid out to the shareholders. So putting money to good use is better value for shareholders, not necessarily just for the company but for shareholders than paying a dividend. So Warren Buffett, just as it Jeff Bezos in Amazon, has been completely consistent in the message. We're not paying dividends, we don't have any plans to pay dividends in the foreseeable future. Now, that's example number one. Example number 2 is that some years ago, Warren Buffett actually put the question to shareholders that he asked the question, do you want Berkshire to pay a dividend? And here's the interesting thing, 98% of the shareholders said no, we don't want a dividend, why? Well, because we trust you with our money, because we know you invest our money wisely, so you can actually get a better return from the money that we could get by investing the money that you give us. If you give us money, maybe we have to re-invest it back in some other company, we rather keep you the money so you can keep the company growing overtime. So not only Warren Buffett has been clear whenever he put the question to shareholders, the shareholders had said, no way, we prefer that you keep the money. Now, we get to the but, but not every manager is as reliable as Warren Buffett. Not every manager is as good as Jeff Bezos, people trust that these type of management is going to make good investments. But of course, managers can keep the money, and they can, what is called sometimes building empires, and building empires as well, a new corporate building. We buy a couple of corporate jets. We do this, and we do that, things that are good, maybe for the CEO and for the managerial team, but not necessarily for the shareholders of the company. And when that happens of course, then it would be better to pay out rather than to re-invest in the company. It's better to reinvest and paying out when you actually get a good return on the money that you reinvest, but if you build empires, if you burn the money, quote unquote, then of course, the money would be better paid out. So those growth opportunities, whether you have them or not and to which degree you have them and how management invest or reinvest the money that it keeps. Those two are critical variables when determining your dividend policy too.
