budcar - I wouldn't say "alot" of insto's aren't allowed to hold non dividend paying companies. Income portfolio managers, sure. Pension funds, yes (a small % of managers). What would be the point of investing with them otherwise?
But all Australian equity fund managers (and internationa eq mgrs that invest here) not fitting that definition (~80%+) can invest in a company whether they pay a div or not. In fact, any "Growth" manager will invest predominantly in non-div paying companies as by rough definition these companies are reinvesting earnings in projects that beat their cost of capital, not paying them out. Value managers don't care much for dividends either, they just invest in companies that are trading at a discount to their intrisic values (that intrinsic value includes any future divs discounted back to a net present value that is added to the NPV of any retained earnings, so it's esentially the same thing - retained or paid out, it is assumed to have the same value to equity holders "today").
I've said it before - because I am not reliant on income from equities (i.e. not a retiree) - I'll take a non-div paying company over a high div company any day because they are generally (and I said "generally) conmpanies with higher capital growth prospects. The exception is when the div is high enough that I can borrow at a rate below the yield and get paid to hold it and receive any cap gain for free (e.g. TLS & TEL) then use that holding to anchor my leverage into other stocks. It's not a strategy for everyone but it works for me (so far).
In any case, divs can be a signal and do attract capital as long as income managers etc. believe the div is "sustainable" (i.e. backed by visible, consistent and steady future earnings - something airlines are not renown for). Be a bit picky here I admit but not "a lot" of insto's can't invest in non-div paying companies.
VBA is a cap growth story, not an income play in my opinion.
VBA Price at posting:
39.5¢ Sentiment: Hold Disclosure: Held
