Given that earnings retention is functionally equivalent to a 100% dividend payout followed by a fully-subscribed rights issue, there is a lot of equity mobilization that takes place every year. Far more than dividend payments.
The problem is not issuance of new capital (net of dividends). Rather the problem is unwillingness by companies retaining earnings to do capex.
And I don’t think we should blame companies for refusing to make significant investment of retained earnings in capex that will expand capacity, that is, growth capex. They will invest when they see the benefits of making those investments.
Right now, they are focusing on repairing stretched balance sheets and/or conserving liquidity for future deployment, both of which are good things.
Over time, as excess productive capacity built in recent years (when easy money and overconfidence were abundant) gets utilized, prospective returns on new investments will start looking promising. Then, and only then, growth capex will, and should, happen.
