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Anonymous
Value of stocks without dividends 2017-02-01 11:15:51 Post No. 1769953
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Value of stocks without dividends 2017-02-01 11:15:51 Post No. 1769953
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It seems to me that the real "value" of stocks is quite weak. You "own" part of a company, but what advantage does that actually give you?
* Voting rights [irrelevant unless you're a huge player]
* A pay out if the company is sold [irrelevant unless the company is sold]
* A share in the company's success (dividends) [most stocks do not provide this]
This leads me to think that dividends are the main thing that really gives value to stock and ties stock prices to the health and wealth of a company - a more successful company can pay higher dividends.
Now, the interesting thing is that most companies don't pay dividends. Why do people still own these stocks? Well, for capital appreciation... that is the fancy term for "other people will pay you more for the stocks in the future because they hope someone else will pay them yet more, and so on". I guess the ultimate rationale fueling this is (or ought to be) that there will be huge dividend payouts eventually - when the company is finished growing - that make the long wait worthwhile.
But something about that makes me uncomfortable... isn't it awfully reliant on investory psychology (ie. speculative)? Aren't many of these companies going to squander all their success or take it for themselves, leaving little behind for the patient shareholders? Won't the ones who are holding the ball at the end eventually be the losers - from them come the gains of those before them, not from the company itself.
One has to wonder at the stock of a company like Google becomes worthless. A ton of money is invested in them but does not pay dividends. What if everyone found out that they would never pay a dividend? Then its value would have little grounding in reality... it would be entirely speculative.
TL;DR: Are stocks wrongly valued because of investor psychology?
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The value of the stock isn't speculative when it represents a real share in the enterprise. If the company never paid a dividend and hoarded the cash forever then the price of shares of the company would increase to account for this each year, in theory.
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>>1769953
I was thinking of this the other day. My conclusion is that the shares are basically useless to a retail investor, but to a huge institutional investor, they can get a seat on the board of directors and direct the company to pay dividends or anything else.
So the big buyers will buy your shares like anyone else. You basically just hold an asset that is useless to you, but has value to buyers who can use it.
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>>1769953
All stocks are speculative paper with very little to do with profits or fundamentals. So you are correct at some degree, and yes, most people have been lied about markets in general for a long time. It's rather funny everybody got it wrong, even majority of so called professionals.
Even if the paper pays you dividend the paper devalues the amount of dividends. The purpose of dividends is to offer a steady cash flow, which funds, for example pension funds require.
If you are a small company you would not like to pay dividends instead keep the money or buy back, small investors therefore dodge paying dividend tax
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>>1769953
Sounds like someone that might prefer bonds, because it's a loan to you and even if the company liquidates you get something.
Also, dividends are practically the same as the stock just going up. If you don't reinvest the dividends you lose potential gains, and if you don't feel safe enough to put it back in then you shouldn't invest in it to begin with. Dividends inspire confidence, much like how a good earnings report might.
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>>1769953
The only value stocks worth dipping a toe in right now are the pennies. The returns can be huge and expansion rapid. Most big board value stocks are insanely overpriced right now. For the big boards go divy stocks. Also don't think that big firms don't have an eye on which micro-caps are getting all the retail money pouring in. Hard to have eyes on everything at once.... get into a stock that has lots of people buying in for a little price versus a big board that is bought on a monthly basis by large firms to keep price stable. If you go large caps...DIVI all the way. A good idea is a good idea no matter the cap, that is the only way to play value.
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>>1769953
Are we now trading mindfucks? Because I don't think anyone in the market thinks about this. And if investor psychology says that the ROI is the speculative increase in value, this can hardly be called "wrong". The whole market is based on investor psychology! It *defines* what's right.
Anyway, here's my mindfuck contribution:
You're talking about shares of a company. But let's take a step back. What the fuck even *is* a company?
We treat them like objects - we buy and sell them, split them, damage them. We also treat them like persons - we have contracts with them, we sue them, we love or hate them. But what exactly is the nature of a company?
Legally it's signatures on pieces of paper, a registration form and a charter - but that hardly captures the nature of the thing. Assets are assets, people are people, so that's not it either. So what is the company *itself*?
As best as I can tell, it's an idea. A common purpose. Something completely etherial and fictional, something made-up. But we all buy into this every day without ever questioning it.
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>>1770520
>Value stocks
>Penny stocks
Pick one faggot.
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This is the greath lie.
Im gonna take your paper, get a part of it, and now you have your paper cut plus money - taxes,
You win nothing moron.
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