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From an investment valuation point of view, any company whose shares are being traded at more than say 12 to 15 x dividend payments has people owning shares who
by CyberFonic 7y ago
From an investment valuation point of view, any company whose shares are being traded at more than say 12 to 15 x dividend payments has people owning shares who are hoping that they will find an even bigger fool to pay for their shares than they did.
Just have a look at the SEC filings for whichever companies you are interested in and see for yourself. You won't have to look for long.
- quickthrower2 7y agoWhy 15 x dividend payments? A growing company should probably be spending those on growing anyway?
- 1123581321 7y agoBasically, 7+% dividend yield is really good because if the dividend is sound, the risk-reward ratio is better than investing in a growth company not paying a dividend. The market should be bidding up the price of the stock to bring the yield in line with typical yields. Since that isn’t happening, there is a risk that the market is pricing into the stock, either that the dividend will be cut or that the company may become insolvent. There are high yield opportunities that are safer than others, but that is the general principle to use when analyzing unusually high yields.
- muzani 7y agoI don't think any startups or any recently IPOed companies are paying dividends. Also doesn't this count companies like Amazon?
- shitpostbot 7y agoAre investors predicting future performance fools? Pretty sure that's the entire point of the investing Or are you just talking about established companies in low growth industries? This idea the dividends are magical and the only way stock isnt worthless is a gold-has-intrinsic-value tier meme
- trcarney 7y agoA lot of big name companies don't pay dividends. Berkshire Hathaway is a notable one. They have only paid a dividend once, in 1967[0]. [0] https://www.investopedia.com/ask/answers/021615/why-doesnt-berkshire-hathaway-pay-dividend.asp https://www.investopedia.com/ask/answers/021615/why-doesnt-b...
- jklein11 7y agoDividends are not a great metric for valuation. There are companies that are operating at a loss but still pay a dividend. Dividends aren't the only way that companies can reward shareholders. Share buy backs tend to be more tax-efficient than dividends. Outside of oil MPs or Real Estate REITs I'm having a hard time finding any company with a dividend >6% I will say I agree with your overall thesis that investments should be some function of expected future cash flows