2min chapter

The Bottom Line cover image

What next for water?

The Bottom Line

CHAPTER

Gearing: Why Companies Borrow to Give More Money to Shareholders

Five years ago, they delivered a reduction in bills to customers. But perhaps with benefit of hindsight, if bills had remained flat in real terms, there would have been more money to spend on environmental improvements. What happened was that companies did pay out dividends, but off what has really tightened up in terms of financial resilience and has learnt the lesson. So these companies are now having to inject more money. You don't make shareholders richer by borrowing money and giving it to them. And verity, you can start this. Why did the companies borrow to give money away to shareholders? Perhaps it is allowed financial engineering in order to push up the amount of dividends that can be paid.

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