Cato, I agree with Tim I find it helps to keep things simple....

Cato, I agree with Tim

I find it helps to keep things simple.
*If the company can earn more than its discount rate by investing in growth then that is better than paying debt or paying dividends for the shareholder

* the investor can create their own dividend at any time, two, three, four or more times a year. If want a 5c gross dividend just sell shares to the value of 5*holding/100. If fortunate with timing can reinvest at a lower price and the dividend becomes 'free'

* If the company cannot invest all the cash surplus due to the extent of opportunities at a particular time it it is better to pay dividend and let the investor decide how to invest the proceeds.

* If debt covenants are looking like they may become under stress then better to pay down debt

* however, if debt covenants are under stress that suggests the company as a whole is under pressure and not generating operating income as planned for the capital structure. That is a warning sign beyond just the debt.

In short, if a company can earn 14% (discount rate 10%) for its investors by reinvesting its cash wisely why not let them do it?