Equity Values and Inflation: Dividends and Debt Financing

In his article in last July's issue of this Review ¹ , Professor Basil Moore purports to show that, contrary to widespread belief, there has been no significant secular decline in UK real corporate profitability. The real decline in UK equity values since 1969 is apparently ascribable to the real reduction in the absolute level of dividend payments, stemming from a combination of government and corporate action. Moreover, management has seemingly reinvested a real ‘dividend shortfall’ in capital projects ‘bringing too tow a rate of return’.