stebbinsd
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| What's the point? |
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I recently learned that Google, one of the most expensive stocks on the market right now, has never paid a cash dividend, and doesn't plan to.
Upon hearing this, I found out that there are hundreds of companies, many of which are in the public view, that don't pay cash dividends.
What's the point of having stock, other than for the sheer sake of having it, if it doesn't pay dividends?
Sure, you might want to sell the stock if the price goes up, but what drives the price to go up? It's certainly not commercial value, because, if the stock doesn't pay a dividend, then, monetarily, it's worth less than the paper its written on.
You can only put a value on something if it has either:
Present worth: Such as a car or house
or
Future worth: Like an accounts receivable or a CD.
So, what is the worth, either present or future, of a stock who's company does not pay dividends?
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Wed Feb 17, 2010 7:05 am |
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oldguy
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quote:
What's the point of having stock, other than for the sheer sake of having it, if it doesn't pay dividends?
I avoid dividend paying stocks - I prefer growth stocks, I look for corporations that apply their profits to growth and expansion of the business rather than paying out dividends.
Capital appreciation is tax-deferred, you do not pay tax until you sell, that may be decades from now. But dividends are taxed annually.
quote:
Present worth: Such as a car or house
or
Future worth: Like an accounts receivable or a CD.
Yes - the corporation has present worth (building, equipment, vehicles, inventory, brand) and it has future worth. As the company grows, you expect its future value to grow , often the stock grows in direct proportion to expected revenue.
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Wed Feb 17, 2010 6:47 pm |
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oldguy
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steb -- I should have added - GOOG stock went from $100 in 2005 to $550 now. Compare your dividend paying stocks to that to determine which provided the highest return. A 5.5X in 5 yrs is a 40%/yr average. The div payers probably paid 3%/yr - and struggled to avoid losing value.
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Wed Feb 17, 2010 6:55 pm |
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coaster
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The question shouldn't be "why own a stock if it doesn't pay a dividend" the question should be "why should I own this particular stock? People own stock for different reasons and that why some stocks pay dividends and some don't. Not every investor wants a dividend. as per oldguy's post. So, if an income stream is what you want, then you measure the desirability of a stock based on its dividend. If the opportunity for a capital gain is what you want, then a dividend doesn't make any sense because it's money gone out of the company. Remember, one way of looking at a dividend is as a capital gain taken now; but by taking it now, you eliminate the opportunity that money could be put to work and grow even more.
~Tim~
Eye Candy : Why Whimsy
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Wed Feb 17, 2010 10:43 pm |
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rtsang
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I think it depends on your investment goal, holding stocks doesn't mean you will have a stable and periodic income like bonds, CD...etc. Individual stocks incurred risk much higher than other tools just FYI or you should invest in index fund instead. Holding a particular company stock means you have high confidence on the future of the company and you should not put all the eggs in one basket.
www.stocktrendcharts.com
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Thu Feb 18, 2010 2:03 am |
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Jason122082
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A properly run company under exceptional management can put that money to work much better then you can. Berkshire has never paid a dividend and never has any plans to (anything can change though, they never intended to split the stock either) you'd be hard pressed to find any dividend paying company over the same allotment of time that would of created a fraction of the wealth Berkshire would have for you.
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Thu Feb 18, 2010 5:10 am |
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samurai
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Location: philippines
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If you're looking for a regular source of income, you may be better off buying bonds. They're really boring compared to stocks, but if you hold them til maturity, you don't lose any of your principal. I have about 60% of my portfolio in bonds, and I get about $90,000 regular income per year from these bonds, that I hold til maturity. BTW, I also re-invest the income, since I still have my regular business.
In my country, equities are risky cuz many exterior things influence the price, including corruption and politics, and so I am looking to other countries for equity investments...that's why this forum is so helpful to me!
The best way to predict the future is to create it.
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Thu Feb 18, 2010 7:12 am |
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