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Until the birth of the Unlisted Securities Market and the flood of small high-tech companies that came to market in the early 1980s, the idea of a company that never paid dividends was a completely alien concept in London, and Digital Equipment Corp was held up as a phenomenon: a firm whose shares were highly sought-after despite the fact that it had never paid a dividend in its history. On September 30, DEC shares stood at $189.75, close to its all-time high of $199; IBM shares were at $150.75, and most observers would have regarded that as a fair comparison of the prospects for the two companies: substantial double-digit profits growth for DEC for the immediate future, single-digit profist growth at best for IBM over the next few quarters. But always keep a hold of nurse for fear of finding something worse is very much the market sentiment in the wake of the earthquake, and glamorous DEC now looks risky compared with stolid IBM – and there is always the consolation of the IBM dividend: the shares currently yield 4%. So it was that IBM shares on Tuesday closed at $118, DEC’s at $115.875. Usually such comparisons are meretricious, but it happens that the companies are also closely comparable in terms of earnings per share – DEC did $8.53 in the year to June, IBM is expected to do anything from $8.50 to $9.45 in the year to December, and DEC should be up around the $11 mark for the year to June 1988. And the New York Times reports a key development that could shift sentiment decisively in favour of the Maynard minimaker: it quotes Dillon Read analyst John Rut-ledge saying that DEC wants to increase the number of its shares held by institutional investors, and may therefore start paying a dividend after its 1988 figures come out next summer – at $1 a share?

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CBR Staff Writer

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