The "Heard on the Street" column in last Tuesday's Wall Street Journal (registration required) talked about a growing trend of companies borrowing large amounts of money to pay dividends. When I started writing for BloggingStocks several months ago, one of the first pieces I wrote was called A rally of declining yields: Should you care? If you read that piece, you will get a good idea how I feel about dividends.

Let's take a logical look at the idea of borrowing money to pay a dividend: A company borrows money at an interest rate which, however low, will likely be substantially higher than what an investor would earn with a savings account (even if it is a high-yield account such as those offered by EmigrantDirect and ING Direct). So, assuming the investor puts the money in a savings account, he is effectively borrowing money at X% to invest it at X-2%. This is not a good deal.

But let's assume that the investor doesn't put it in a savings. Let's say he decides to put it in his favorite stock that he considers to be undervalued. Let's say he puts it in the stock that paid the dividend. If he does that, he will essentially have been charged a hefty tax to plow the money back into the company. This is also not a good deal.

In cases where a company's management believes the stock is undervalued and the company is financially stable, borrowing money to buy back shares can be a good way to increase shareholder value. But, in my opinion, borrowing money to pay a dividend never makes sense.

Unionized teachers from New York and New Hampshire will be receiving $450 checks as part of a settlement with ING Group N.V. (ADR) (NYSE:ING), the financial and insurance company. Evidently, ING paid these unions to have business sent its way -- quite an illegal affair. Famed New York Attorney General Eliot Spitzer announced the settlement of some $30 million restitution and hopes that this will end his investigation of the company.

The New York State United Teacher Union, the NYSTU, paid $100,000 and adopted reforms after allegations about business steering were launched at the company. The settlement stems from Spitzer's claim that it encouraged union members to enroll in retirement plans that, according to critics, charged such high fees that returns were eroded. More pocket-lining for ING was apparently at play here, in yet another example of a company that just can't play by the rules.

Nothing new here, since corporate governance is in shambles in some industries these days -- but it is getting better due to the spectacular collapses of Enron and Worldcom, among others. Spitzer said that he wants the NYSUT agreement to set a new standard for transparency in the marketing of retirement plans. This is a great idea for *any* public entity -- complete and total transparency will set you free -- and prevent greed and illegal activity at the same time. How nice.