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Profits being flat isn't quite right. Profits being zero is the case where a company issuing a dividend would eventually become worthless.
by phamilton 11y ago
Profits being flat isn't quite right. Profits being zero is the case where a company issuing a dividend would eventually become worthless.
- JDDunn9 11y agoThis is a strawman argument. Cash is not required to be re-invested to maintain current profitability.
- phamilton 11y agoThat's not the argument I'm making. I'm not disagreeing with you. The point I'm making, which I admit is an obvious one, is that without profits a dividend will erode a company's value. Simple flow of money. Unless there's a surplus flow of money in, you can't have an outward flow. Therefore, the effect of a dividend on a company's market cap depends on how much profit they have in comparison.