An added bonus is dovidends dividends are generally taxed at a lower rate than interest income. Invest in stocks that sstock a high dividend regularly. All the best option analysis models include interest rates in their calculations using a risk-free interest rate such as U. When dividends upon the preferred and special stocks, if any, to the extent of the preference to which such stocks are entitled, shall have been paid or declared and set apart for payment, a dividend on the remaining class or classes or series of stock may then be paid out of the remaining assets of the corporation available for dividends as elsewhere in this chapter provided. That's why companies that don't pay dividends trade. Ddividends put option grants you the right to
I read somewhere that companies are not required to pay dividends to shareholders this is correct, yes? If fividends, then if company A never pays dividends to its shareholders, then what is the point of owning company A's stock? Surely the right to one vote for company A's Board can't dividendss that valuable. Let's pretend we're talking about shares in a manufacturing company. The company has one million shares on its register. You own one thousand of them. That means that for every dollar of the company you own, 10c of that value is backed by stick physical assets of the company.
So in ten years time, if the company paid out everything in dividends, you would have doubled your money, but they would have machines which are ten years older and would not have grown in value for that entire time. However, if they reinvested their profits, the compounding growth will have resulted in a company many times larger than it started. Eventually in practice there is a limit to the growth of most companies and it is at this limit where dividends should be being paid out.
But in most cases you don't want a company to pay a dividend. Remember that dividends are taxed, meaning that the government eats into your profits today instead of ;ay the distant ;ay where your money will have grown much higher. Dividends are bad for long term growth, despite the rather nice feeling they give when they hit your bank account this is a simplification but is generally true.
TL;DR - A company that holds and reinvests its profits can become larger and grow faster making more profit in the future to eventually pay out. A company that never has paid dividends, is stocj worth something to people because of its potential to start paying dividends later and it is often better to grow now and payoff later. However, the actual answer is much more disapointing, because people are not rational and the stock market is no longer about investing in companies or earning dividends.
Even stocks that pay dividends, very few people buy it for dividends. They buy it because they believe someone else will be willing to buy dividedns for slightly more, shortly after. Different traders have different timeframes, ranging from seconds to months. It seems to me that your main question here is about why a stock is worth anything at all, why dicidends has any intrinsic value, and that the only way you could imagine a stock having value is if it pays a dividend, as though that's what you're buying in that case.
Others have answered why a company may or may not pay a dividend, but I think glossed over the central question. A stock has value because it is ownership of a piece of the ootions. The company itself has value, in the form of: Some of these things don't have clear cut values, and this can result in differing opinions on what a company is worth. Share price also varies for many other reasons that are covered by other answers, but there is almost always some intrinsic value to a stock because part of its value represents real assets.
This is an excellent question, one that I've pondered before as well. Here's how I've reconciled it in my mind. Why should we dkvidends that a stock is worth anything? Dividenss all, if I purchase stocck share of said company, I own some small percentage of all of its assets, like land, capital equipment, accounts receivable, cash and securities holdings, etc. Notionally, that seems like it should be "worth" something. However, that doesn't give me the right to lay claim to them at will, as I'm just a very small minority shareholder.
The old adage says that "something is only worth what someone is willing to pay you for it. As you noted, one reason why a stock might be attractive to someone else is as a potentially tax-advantaged revenue stream via dividends. Especially in this low-interest-rate environment, this might well exceed that which I might obtain in the bond market. The payment of income to the investor is one way that a stock might have some dividencs value" that is attractive to investors.
As you asked, though, what if the stock doesn't pay dividends? As a small shareholder, what's in it for me? Without any dividend payments, there's no regular method of receiving my invested capital back, so why should I, or anyone else, be willing to purchase the stock to begin with? I can think of a couple reasons: Expectation of a future dividend. You may believe that at some point in the future, the company will begin to pay a dividend to investors. Dividends are paid as a percentage of a company's total profits, so it may make sense to purchase the stock now, while there is no dividend, banking on growth during the no-dividend period that will result in even higher capital returns later.
This kind of skirts your question: a non-dividend-paying stock might be worth something because it might turn optikns a dividend-paying stock in the future. Expectation of a future acquisition. This addresses the original xividends of my argument above. If I can't, as a small shareholder, directly access the assets of the company, why should I attribute any value to that small piece of ownership?
Because some other entity might be willing to pay me for it in the future. In the event of an acquisition, I will receive either cash or another company's shares in compensation, which often results in a capital gain stock options pay dividends me as a shareholder. If Optionss obtain a capital gain lptions cash as part dividneds the deal, then this proves my point: the original, non-dividend-paying stock was worth something because some other entity decided to acquire the company, paying me more cash than I paid for my shares.
They are willing to pay this price for the company because they can then reap its profits in the future. If I obtain a capital gain via stock in as part of the deal, then the opptions restarts in some sense. Maybe dividejds new stock pays dividends. Otherwise, perhaps the new company will do something to make its stock worth more in the future, based on the same future expectations. The fact that ownership in a stock can hold such positive dividenss expectations makes them "worth something" at any given time; if you purchase a stock and then want to sell it later, someone else is willing to purchase it from you so they can obtain the right to experience a positive capital return in the future.
While stock valuation schemes will vary, both dividends and acquisition prices are related to a company's profits: This provides a connection between a company's profitability, expectations of future growth, and its stock price today, whether it currently pays dividends or not. The stock itself can go up in price. This is not necessarily pure optione either, the company could just reinvest the profits and grow. Since you own part of a company, your share would also increase in value. The company could also decide to start paying dividend.
I think one rule of thumb is that growing companies won't pay out, since they reinvest all profit to grow even more, but very large companies like McDonalds or Microsoft who don't really have much room left to grow will pay dividends more. Actually, Google optiions instance neither pays dividend nor do you get to vote.
Basically all you get for your money is partial ownership dividwnds the company. This still gives you the right to seize Google assets if you go bankrupt, if there's any asset left once the creditors are xtock credit gets priority over equity. What you are missing is that the entire concept of the dividend is an illusion. There's little qualitative difference between a stock that pays dividend, and dviidends stock that doesn't. Likewise, you could take a stock that does pay dividend, and make it look exactly like a non-paying stock by simply taking every dividend you get and buying more of the same stock with it.
So from this simplistic point stock options pay dividends view, it is irrelevant whether the stock itself pays dividend or not. There is always the same decision of whether to cut the goose or let it lay a few more eggs that every shareholder has to make it. Paying a dividend is essentially providing a different default choice, but makes little difference with regards to your choices.
There is however more to it than simple return on investment arithmetic: As I said, the alternative to paying dividend is reinvesting optiojs back into the enterprise. If the company decided diividends pay out dividend, that means they think all the best investing is done, and they don't really have a particularly good idea for what to do with the extra money. Conversely, not paying is like management telling the shareholders, "no we're not done, we're still building our business!
So it can be a way of judging whether the company stock options pay dividends concentrating on generating profit or growing itself. Needless to say the, the market is wild and unpredictable and not everyone obeys such assumptions. Furthermore, as I said, sividends can effectively overrule the decision by increasing or decreasing your position, regardless of whether they have decided to pay dividend to begin with. Lastly, there may be some subtle differences with regards to things like how the income is taxed and so on.
These don't really have much to do with the market itself, but the bureaucracy tacked onto the market. Shareholders are sticking around if they feel the company stck be more valuable in the future, and if the company is a target for being bought out. While there are many very good and detailed answers to this question, there is one key term stock options pay dividends finance that none of them used and that is Sock Present Value.
While this is a term generally associate with debt and assets, it also can be applied to the valuation models optlons a company's share price. The price of the share of a stock in a company represents the Net Present Value of all future cash flows of that company divided by the total number of shares outstanding. This is also the reason behind why the payment of dividends will cause the share price valuation to be less pah its valuation if the company did not pay pah dividend.
Unlike with a fixed income security, or even a stock options pay dividends rate stock options pay dividends, it is difficult to predict what the future cashflows of a company will be, and how kptions chose to value things as intangible as brand recognition, market penetration, and executive competence are often far more subjective that using 10 year libor rates to plug into otions present value calculation for divideends floating py bond of similar tenor.
Opinion enters into the calculus and this is why you end up having a greater degree of price variance than you see in the fixed income markets. You have had situations where companies such optiojs Amazon. That is because the analysis of the value of their intellectual properties or business models would, overtime provide a future value that was equivalent to their stock price at that time. Imagine that a company never distributes any of its profits to its shareholders.
The company might invest these profits in the business to grow future profits or it might just keep the money in the bank. Either way, the company is growing in value. But how does that help you as a small investor? If the share price never went up dividebds the market value would become tiny compared to the actual value of the company. At some point another company would see this dkvidends put a bid in for the whole company. The shareholders wouldn't sell their shares if the bid didn't reflect the true value of the company.
This would mean that your shares would suddenly become much more valuable. So, the reason why the share price goes up over time is to represent the perceived value of the company. As this could be realised either by the distribution of dividends or a return of capital to shareholders, or by a bidder buying the whole company, the shares are actually worth something divixends someone in the market.
So the share price will tend to track the value of the company even if dividends are never paid. In the short term opttions share price reflects sentiment, but over the long term it will tend to track the value of the company as measured by its profitability. Companies that don't pay dividends are, ostensibly reinvesting their cash at returns higher than shareholders could obtain elsewhere. They are reinvesting in productive capacity with the aim of using this greater productive capacity to generate even more cash in the future.
This isn't just true for stocm, but for almost any cash-generating project. With a project you can stock options pay dividends some type of productive assets, you may perform some kind of transformation on the good or notwith the intent of selling a product, service, or in fact the productive mechanism you have built, this productive optiins is typically called a "company". What is the value of such a productive mechanism? Yes, it's capacity to continue producing cash into the future.
Under literally any scenario, discounted cash flow is how cash flows at distinct intervals are valued. A company that does not pay dividends now djvidends capable of paying them in the future. Berkshire Hathaway does not pay a dividend currently, but it's cash flows have been reinvested over the years such that it's current cash paying capacity has multiplied many thousands of times over the decades.
This is why companies that have optuons paid dividends trade at higher prices. Microsoft did not pay dividends for many years because the cash was better used developing the company to pay cash flows to investors in later years. A companies value is the sum of it's risk adjusted cash flows in the future, even when it has never paid shareholders a dime. But let's say you want to trade this promise to pay divodends the 20 years is stovk.
Would it be worth anything? Of course it would. Imagine that this "promise to pay" is much like a non-dividend paying stock. Throughout its life it has never paid anyone anything, but over the years it's value goes up. Stock options pay dividends haven't seen any of the other answers address this point — shares are a form of ownership of a company and thus they are an entitlement to the proceeds of the company, including proceeds from liquidation.
Imagine an extreme, contrived example whereby you own shares in stock options pay dividends company that is explicitly intended to only exist for a finite and definite period, say to serve as the producers of a one-time event. Consider a possible sequence divieends major events in this company's life: So why would the shares eividends this hypothetical company be worth anything? Because the company itself is worth somethingor rather the stuff that the company owns is worth something, even or in my pau, especially in the event of its dissolution or liquidation.
Besides just the stuff that a company owns, why else would owning a portion of a company be a good idea, i. Buying shares of a company is a good idea if you believe and are correct that a company will make larger profits or capture sfock stock options pay dividends e. If your beliefs don't significantly differ from others then ideally the price of the companies stock should reflect all of the future value that everyone expects it to have, tho that value is discounted based on time preferencei.
Some notes on time preference: But apart from whether you should buy shares in a specific company, owning shares can still be valuable. Not only are shares a claim on a company's current assets in the event of liquidation but they are also claims on all future assets djvidends the company. So if a company dividenrs growing then the value of optionss now should reflect the discounted future value of the company, not just the value of its assets today.
Divieends shares in a company pays dividends then the company gives you money for owning shares. You already understand why that's worth something. It's basically equivalent to an annuitytho dividends are much more likely to stop or diividends whereas the whole point of an annuity is that it's stock options pay dividends sometimes fixed amount paid at fixed intervals, i. As CQM points out in their answerpart of the value of stock shares, to those that own them, and especially to those considering buying them, is the expectation or belief that they can sell those shares for a greater price than what they paid for them — irrespective of the 'true value' of the stock shares.
But even in a world where everyone magically had the same knowledge always, a significant component of a stock's value is independent of its value as a source of trading profit. As Jesse Barnum points out in their answerpart of the value of stocks that don't pay dividends relative to stocks that do is due to the potential differences in tax liabilities incurred between dividends and long-term capital gains.
This however, is not the primary source of value of a stock share. If you buy shares of a company, never earn any sttock, and then sell the stock paj a profit in 20 years, you've essentially deferred all of the capital optiions taxes and thus your money has compounded faster for a 20 year period. For this reason, I tend to favor non-dividend stocks, because I want stock options pay dividends maximize my long-term gain.
Not sure how this has got this far with no obvious discussion about the huge tax advantages of share buy backs vs dividend paying. Of these, dividends are often by dividendw the worst choice. Virtually all sane shareholders would just rather the company put the capital to work or concentrate the value of their shares by taking many off the market rather stockk paying a taxable dividend. Stock has value to the buyer even if it does not currently pay dividends, since it is part ownership of the company and the company's assets.
The owners of which you are now a ztock hire managers to make a "dividend policy decision. If the company has no internal investment opportunities at or above this desired rate, then the company has an obligation to declare ddividends dividend. Paying out a dividend returns this portion of profit to the owners, who can then invest their money elsewhere and earn more.
It is in the owners' best interest to receive their portion of their company's profit as a dividend pat re-invest it in other stocks. It's the same with a stock. If other people are willing to buy it off you for a price X, it's worth at least close stock options pay dividends price X to you. In stock options pay dividends the price X depends on the value of the assets of the company, including unknown values like expected future profits or losses.
Speaking sttock experience as a trader, in practice it's very often really just price X because others pay price X. For simplicity, imagine the case that you own ALL of the shares of XYZ corporation. Furthermore, buybacks have a number of tax advantages over dividends to taxable shareholders see my answer in Can I get a dividend "free lunch" by buying a stock just before the ex-dividend date and selling it dicidends after? That said, it is important to recognize the shareholders who are less savvy about knowing when to accept the buyback by correctly valuing the company can get burned at the profit of the savvy shareholders.
A strategy to avoid being burned if you aren't price savvy is simply to sell a fraction in order to get your pro rata share of the buyback, in many respects simulating a dividend but still reaping some but not all of the tax advantages of a buyback. This is where you can. Stocks represent partial ownership of the company.
In the example above, it would have to be Common Stock, as preferred stock does not confer ownership. There are opyions ways that an asset can generate value. One is that the asset generates some revenue e. Stocks are the same. Most companies get taken over eventually. More to stock options pay dividends point, ANY company with a public float over 50 percent that's large opptions viable enough to fall on people's radar screens oltions get taken over if its oltions price is "too stock options pay dividends relative to its long term prospects.
It is the possibility of a takeover, as much as anything else, that bolsters the stock prices of many companies, divifends those that stock options pay dividends pay dividends. In essence, the takeover price is just one large liquidating "dividend. If the company is performing well and increasing profits year after year, its Net Worth will increase, and if the company continues to beat expectations, then over the long term the share price will follow and increase as opptions.
On the other hand, if the company performs poorly, has a lot of debt and is losing money, it may well stop paying dividends. There will be more demand for stocks that perform well than those that perform badly, thus driving the share price of these stocks up even if they don't pay out dividends. There are many market participants that will use different information to make their decisions to diviends or sell a particular stock. Some will be long term buy and hold, others will be day traders, and there is everything in between.
Some will use fundamentals to make their decisions, others opitons use charts and technicals, some will use a combination, and others will use completely different information and methods. These different market stockk will create demand at various times, thus driving the share price of good companies up over time. That is stock options pay dividends main reason why people still buy stocks that pay no dividends. It is my reason for buying them too.
Detailed answers to any questions you might have. Discuss the workings and policies of this site. Learn more about Stack Overflow the company. Learn stock options pay dividends about hiring developers or posting ads with us. Join them; it only takes a minute:. Here's how it works:. Opgions can ask a question. The best answers are voted up and rise to the top. If a stock doesn't pay dividends, then why is the stock worth anything? What is it that I'm missing? Seventy or so years ago, stocks that didn't pay dividends were regarded as useless; ooptions investors bought bonds and dividend-paying stocks, with the emphasis on bonds.
Aug 16 '15 at Berkshire Hathaway is one such firm which answers your query, only paid dividend once. But it does payback in forms of share buybacks. So shareholders do get something. Aug 17 '15 at A stock that does pay dividends is actually worth less after it pays the dividend than before it paid it. So sttock you had 2 exact same companies worth the same and making the same profit, the only difference being that one pays out a dividend and one not, the one paying the dividend would be worth less than the other company after it pays the dividend out.
Aug 19 '15 at I would rather invest in a company that does not pay dividends but is increasing profits and growing year after year than a company that pays dividends but its profits are decreasing year after year. How long will the company continue to pay dividends for if it starts making less and less profits to pay them with? You should never invest in a company solely because they pay dividends, stock options pay dividends you do you will end up losing money.
It's important to remember what a share is. It's a tiny portion of ownership of a company. Note that there is the alternative of reinvesting some stock options pay dividends giving some as dividends. This is a continuum, not a binary choice. Correct, I was presenting the binary stock options pay dividends ophions better explain the concept. Could also add, diidends when dividents are paid out, the value of the company decreses accordingly after all, it has just paid out lots of moneywhich means the value market value of the shares you own the value of your stock also decrease.
JoeTaxpayer that's not what I meant. It's much easier to grow faster when you're smaller. So they invest some of it and give some of it to their investors, as smaller investors can do disproportionately better with the same amount of money. Warren Buffet has forex t3 snake talked about how he could find much better investments if he didn't have so much money to invest.
I think this answer and most others shown here skirts the actual question that the OP asked. I believe he was asking why diviends share of stock would hold any intrinsic value whatsoever, e. That is, why stock options pay dividends the profitability or assets of a company impute some perceived value to its shares? Instead, this is really just an argument against payment of dividends in many cases, not an answer to the OP's question.
A good answer, but it just doesn't seem to address this question. Aug 18 '15 at There has to be an expectation of dividends at some point down the line. Otherwise it is just fine art collecting. Sure, this might be why many people do it, but the fundamental, underlying reason that some successful or on their way to successful companies have little or no dividends is because they are reinvesting for growth.
Just because a sector of the market speculates on these companies short-term doesn't change why the companies have value. In their adjusted share price was 44c. One share bought 25 years ago would be yielding roughly 3 times its value in dividends alone today. That's why companies that don't pay dividends trade. If you could go back in time and purchase Microsoft shares inwould you be willing to pay double or even triple their price?
They were cheap back then. They may even be cheap now. Yet stock options pay dividends likely didn't pay a dividend back then. Fundamentally misunderstands what the assumption of rationality means, and highlights as irrational something that doesn't actually violate that assumption. Aug 20 '15 at The company itself has value, in the form of Real physical assets buildings, a fleet of vehicles, desks, inventory, raw materials. Intangible assets cash, investments, intellectual rividends, patents.
Branding recognizable product, trustworthy company name, etc. Established customer base cell phone carrier with customers on contracts. Existing contracts or relationships Hulu may have secured exclusive rights dividenes stream a particular network's shows for X years. You get the idea. A company's value is based on things it owns or things that can be monetized. By extension, a share opptions a piece of all that. Some of these things don't have clear cut values, and this can result dividdnds differing opinions on what a company is worth.
Optipns not sure this really addresses the core of the question, because, while yes, the shares I hold mean that I own 0. DanHenderson divvidends this case, effectively, the share is the asset. If stock options pay dividends wants to buy the whole company, they can't do so without paying you for your share. Additionally, at least theoretically, you do have a claim on the underlying assets stocj affect the valuation of the company, you just lack the voting power to force it to be optoons up or distributed.
I think If someone wants to buy the whole company, they can't do so without paying you for your share. DanHenderson the most direct way to think about it is not that the whole company is being bought out, but that you "buy-out" your shares when you atock them, and someone else "buys-out" those shares when you sell them. It's dividemds the entire company as a whole I can think of a couple reasons Expectation of a future dividend.
While stock valuation schemes will vary, both dividends and acquisition prices are related to a company's profits A more profitable company can afford to pay more money stock options pay dividends to shareholders. A more profitable company will fetch a higher price to an acquiring entity because it provides the ability to generate more future cash. This provides a connection between a company's profitability, expectations of future growth, and its stock price today, whether it currently pays dividends or not.
This is probably the best-formulated answer here. The one thing missing was touched upon by others: some stocks allow their owners to vote. While many owners will not care, for others employees, customers, business partners, troublemakers can be the right to vote and speak during important company events crucial. Thanks for the answer. Oct 15 '16 at Most good and healthy companies make enough profits to stock options pay dividends pay out dividends and invest back into the company to keep growing the company and profits.
In fact a good indication of a well performing company is when their dividend per share and earnings per share are both growing each year and the dividends per share are less than the earnings per share that way dividends are being paid out from new profits and not existing cash holdings. This information can give you an indication of both a stable and growing company. For some investors, there is an additional advantage of purchasing a dividend-paying stock instead of just selling a portion of your position on a regular basis: tax treatment.
In the US, for example, it's possible that the income taxes due on dividend income are less dibidends the amount due if the same income were to be made by selling stock and triggering a capital gain, especially if it were a short-term gain. I think you should optilns that shares are ownership, i. I divirends that's the key element to this question.
KennyEvitt, no it is not. Stick fact that you can make money on stocks by buying them, then selling later at a higher price, isn't news to anyone. The question is why the price should increase or even exist in the absence of an expected payout in the form of dividends. There are dividendx to that question, but none of them are given here. Shareholders can [often] vote for management to pay dividends.
Greater fool theory share improve this answer. If optlons shareholder only has a couple votes though, then how much of a difference can he really make? Also, why does a shareholder want to stick around if the company is going to be bought out? I'm not convinced I agree re "greater fool theory", but yes, the presumption is that the company will eventually be bought out. It's a gamble, but hopefully you aren't making this choice of investment without some reason to be confident. CQM: If you have good reason to believe the company's value is increasing fast enough to justify the higher price, a fool is not required.
If you believe this without good reason, that's a different matter. The answer is Discounted Cash Flows. Otions Own Valuable Stuff. Consider a possible sequence of major events in this company's life The company raises money from investors e. Investors are issued shares in proportion to the amount they invest. The company purchases assets, e.
The company puts on the one-time event, both spending money on, e. Pxy company 'commits dividennds, i. So why would the stock options pay dividends of this hypothetical company be worth anything? Other Sources of Company Value. Some notes on time preference Different people can have wildly divergent time discount preferences. Humans seem to be mathematically inconsistent dividendz their discounting! But apart from whether you should buy shares in a specific company, owning shares can still be valuable.
Other Sources of Stock Share Value. Remember that long term appreciation has tax advantages over short-term dividends. Another example, in estate planning, is something called a pptions basis If you sell the stock that day, you owe taxes on optionz gain. This doesn't answer the question. The OP doesn't understand why stocks are valuable at all, i.
The reason of course is that companies own stuff that's worth something, hence owning a portion of the company is — if nothing else — partial ownership of stuff that's worth something. And that's true even if companies don't last forever. I felt that that point had been sufficiently made my many other answers, so I was attempting to add some additional related information.
Thanks for the downvote. Aug 24 '15 at dlvidends There isn't clear and decisive guidance about whether answers should be comprehensivebut I think they should be and your answer is extremely incidental. I also can't change my vote until you edit the answer. I'll point out that the tax treatment of dividends vary by jurisdiction. Dividend income in Canada from optoins Canadian corporation, for instance, is taxed much less than ordinary income.
Investors desiring income from their investment may prefer a dividend. Others have pointed out the tax deferrment portion of dividend policy, so I skipped that share improve this answer. Since I'm missing the shortest and simplest answer, I'll add it A car also doesn't offer dividends, yet it's still worth money. You are missing the fact that dividensd company can buy back its own shares. After 1 the total number of shares would be fewer, but saying you owned less of XYZ would be stovk complaining that you are shorter when your height is measured in inches than dividens centimeters.
So indeed, a buyback is an alternative to a dividend. The company gets stockk worth from how well it performs. If the company doesn't pay out dividends, what does it matter to the investor how well otions performs? Vividends the stock is inherently completely worthless it does nothingthen it's mind-boggling that divieends would attach stok to it like that The point is capital gain, you make money once you sell it.
Why would you buy a stock for dividends if then it performs bad? You'll end up selling it dividsnds losing immibis. The problem is you are answering the question optione do stocks that don't pay dividends have value" with "the value of stocks without dividend can go up". It's completely begging the question, it's an incomplete answer. I used a house as an investment reference. If you cant live in a house you can still hope for capital gain than getting monthly payments dividends.
The questions states what is the point of owning stocks if there are no dividends and thats capital gains. So yes, stocks which do not pay dividends are still worth the net liquidation value of all the assets owned by the company, divided by divirends number of stocks. Aug 21 '15 at Securities change in prices. Four HUNDRED ten thousands! There are two main ways you can make money through shares: through dividends and through capital gains. I feel like you're mixing up the cause and effect here.
The question seems to be, why is the company worth more to shareholders who do not receive any divvidends if it performs well? You're just saying it's worth more because other people consider it to be worth more, but that doesn't make sense -- the shareholders aren't making money, sstock the question.
Mehrdad - no, you have miss-read my answer, I have said that if a company continues apy perform well by increasing profits year after year, this will make the company worth more increasing its assetsand market participants will prefer these companies to those not performing well, driving the share price up over time. And also, you have miss-read the question as well. Mehrdad - you can pat refer to my answer to a similar question here: money.
Victor That's a circular argument. At dibidends point somebody must be able to make money other than by selling the stocks. The greater fool theory can only take you so far. No, you are failing to explain why anyone would invest in such a company in the absence of an expectation that at some point in the future dividends will be paid. Would you like to answer one of these unanswered questions instead?.
Get the weekly newsletter! In it, you'll get:. The week's top questions and answers. Questions that need answers. Others optinos pointed out the tax deferrment portion of dividend policy, so I skipped that.
The Basics of Stock Dividends
What is a ' Stock Dividend ' A stock dividend is a dividend payment made in the form of additional shares rather than a cash payout, also known as a "scrip dividend. The first option pricing model, the Black Scholes model, was designed to evaluate European-style options, which don't permit early exercise. So Black and Scholes. I read somewhere that companies are not required to pay dividends to shareholders (this is correct, yes?). If so, then if company A never pays dividends to its.