Refutation of the Theory of “Compound Interest Effect” in the Capitalization of Dividends

Анотація

The article considers the peculiarities of the negative effect of the compound interest effect in terms of capitalization of dividends. The reasons and circumstances of the negative value of the corresponding effect in investment processes was specified. It is specified that the effect of compound interest is often not positive at all in the case of capitalization of dividends on shares. Dividend tax neutralizes the "magic of compound interest" in the case of appropriate capitalization of dividends. The payment of dividends is economically feasible only when the investor plans to direct these funds to consumption and not to capitalization. To improve the conditions of investment processes, the need to reduce the tax on dividends has been proven. It was shows the possibility of avoiding the tax on dividends for investors in the case of its relatively large size.

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