3 ms·

It is often better for everyone involved (thanks to slimy but legal tax structures) to NOT provide dividends, even if there is no other use for the money; In th

It is often better for everyone involved (thanks to slimy but legal tax structures) to NOT provide dividends, even if there is no other use for the money; In that case, the would-be-dividend is incorporated into the price of the share (just as it is on the day before dividend payment from a company that DOES pay dividend), and you can realize it by selling the share.

andrewflnr 9y ago
> the would-be-dividend is incorporated into the price of the share This is right where we started. I'm not actually going to get the dividend, and neither will anyone else, so why would I or anyone I might sell it to pay more for that stock than I would otherwise?
- beagle3 9y ago
  In general, the value of a share is: value = intrinsic_value + cash_and_equivalents - liabilities; intrinsic_value includes brand recognition, goodwill, equipment, etc; this value is subjective. cash_and_equivalents are decimated by dividends, so it doesn't matter if you get them as dividends or share value
  - hellbanner 9y ago
    "the value is subjective" that's what my issue with stock investment is. They aren't financial tools, in the way I'd like to think of a financial tool like a loan or interest-bearing account. They're gambling on what other people en masse will value a stock - some of whom are also trying to predict my actions. If I predict price goes down, I should short. If I predict prices goes up, I should buy. Even the parent comment to my question says "you get money in case of a merger or acquisition" which to me is a bigger analogue of the Bigger Fool theory. I only make money if another company buys the company I have stock in which they would buy only if they expect to make money. In their case, possibly whoever buys the company can take dividends (as the new CEO) but it still looks like a bizarre thing to do (buy stock).

andrewflnr 9y ago

> the would-be-dividend is incorporated into the price of the share This is right where we started. I'm not actually going to get the dividend, and neither will anyone else, so why would I or anyone I might sell it to pay more for that stock than I would otherwise?

beagle3 9y ago
In general, the value of a share is: value = intrinsic_value + cash_and_equivalents - liabilities; intrinsic_value includes brand recognition, goodwill, equipment, etc; this value is subjective. cash_and_equivalents are decimated by dividends, so it doesn't matter if you get them as dividends or share value
- hellbanner 9y ago
  "the value is subjective" that's what my issue with stock investment is. They aren't financial tools, in the way I'd like to think of a financial tool like a loan or interest-bearing account. They're gambling on what other people en masse will value a stock - some of whom are also trying to predict my actions. If I predict price goes down, I should short. If I predict prices goes up, I should buy. Even the parent comment to my question says "you get money in case of a merger or acquisition" which to me is a bigger analogue of the Bigger Fool theory. I only make money if another company buys the company I have stock in which they would buy only if they expect to make money. In their case, possibly whoever buys the company can take dividends (as the new CEO) but it still looks like a bizarre thing to do (buy stock).