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Sure, with no earnings growth and no price increase shareholders would be richer due to the cash returned via dividends. But that doesn't explain why the price
by kgwgk 7y ago
Sure, with no earnings growth and no price increase shareholders would be richer due to the cash returned via dividends.
But that doesn't explain why the price you pay for $X in earnings is higher in one case than in the other. (Retained earnings could explain a minimal part of the increase.)
There is no reason for that $100bn company to be a $110bn company next year if it has returned the $10bn it earned to shareholders and it's still going to earn $10bn.
- mslot 7y agoA reason could be that the yields on other forms of investment are going down. If buyers are willing to accept a 1% yield because they cannot easily get it anywhere else then the share price can go to $1 trillion, or even further if yield is expected to go up over time.