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Why purchase shares in a company if they don't pay dividends?
by Fargoan 4y ago
Why purchase shares in a company if they don't pay dividends?
- toomuchtodo 4y agoShare appreciation?
- sudosysgen 4y agoWithout dividends, the stock market is a zero-sum game.
- toomuchtodo 4y agoDividends are just a mechanism to realize profit without having to sell a security. Amazon and Google pay no dividends, for example, but the gains from their growth are very real. You just have to sell to realize the gain versus a dividend where you receive a payout instead of the price of your holdings increasing.
- dhdheysudh 4y ago
- sudosysgen 4y agoAmazon and Google engage in stock buybacks, which are dividends for all intents and purposes.
- colinmhayes 4y agoBuybacks are just dividends by another name
- chii 4y ago> Without dividends, the stock market is a zero-sum game. If a company is able to make profit from their business, then ownership of that company is valuable, regardless of whether they return that profit to you in the form of dividends or not.
- scaredginger 4y agoThis is pure ignorance. Care to elaborate so people can explain why you're wrong?
- frognumber 4y agoI'll explain the argument and the counterargument. The argument is that all companies go out-of-business at some point, eventually. With no way to extract money (e.g. dividends), their long-term value is 0. In the meantime, buying and selling is a zero-sum-game. This argument is incorrect for two reasons: 1) Dividends are one way to extract value. Another is mergers, acquisitions, and spin-offs. For example, if Musk had bought Twitter with no dividends, shareholders would make money. If Google were split into 50 mini-companies, and Microsoft acquired one of those, shareholders would make money. There are many other ways to extract value 2) Like dollars, shares act as a fiat currency of sorts. We can all keep our saving there if we all keep believing. If a company isn't in the profit-making business, that's a place for shareholder activism, though. That can be a pool of small investors, or they can be bought by a Berkshire-Hathaway, who can reorganize them for profitability, and resell them.
- sudosysgen 4y ago> 1) Dividends are one way to extract value. Another is mergers, acquisitions, and spin-offs. For example, if Musk had bought Twitter with no dividends, shareholders would make money. If Google were split into 50 mini-companies, and Microsoft acquired one of those, shareholders would make money. There are many other ways to extract value This doesn't fix the issue. Unless one of those spin-offs eventually makes a profit and pays a dividend, you're still engaging in a zero-sum game. You just offloaded the bag to someone else, either the owners of the merged company, or the acquirer. > 2) Like dollars, shares act as a fiat currency of sorts. We can all keep our saving there if we all keep believing. That doesn't stop it from being a zero-sum game, though. We already have fiat currency that is superior in every way, so what actual benefit to the shareholder over holding fiat? > That can be a pool of small investors, or they can be bought by a Berkshire-Hathaway, who can reorganize them for profitability, and resell them. Right, so you mean, eventually the company can be made to pay dividends, which is kind of besides the point?
- Fargoan 4y agoIf I want an asset purely for price speculation I'll buy Bitcoin.