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This has always puzzled me. As a stockholder what is the use of a stock that never pays dividends? What does ownership of a bussiness mean when you have no shar
by zarkov99 6y ago
This has always puzzled me. As a stockholder what is the use of a stock that never pays dividends? What does ownership of a bussiness mean when you have no share of its profits?
- samatman 6y agoThe dirty secret is that stock holding has slowly shifted to be the safer hedge against inflation, which has been creeping upward in the classic tradition of frog boiling. Government bonds are safer still, but on the right time horizon index funds have had better rates of return. Point is, you have to park your savings somewhere, because if you leave them in the bank, the paltry returns of a savings account won't maintain purchasing power relatively to inflationary devaluation.
- zarkov99 6y agoright, I understand that, and I accept that currently cash is trash and bonds are little better. But it is very unsettling to think that there is so little tethering non-dividend paying stocks to any sort of value.
- xiphias2 6y agoWouldn't you want to own a company that doesn't pay profits for 20 years, but gives you $10B every year after those 20 years? Discounted cash flow (https://en.wikipedia.org/wiki/Discounted_cash_flow https://en.wikipedia.org/wiki/Discounted_cash_flow) is being used to value companies for this reason.
- itsoktocry 6y ago>Wouldn't you want to own a company that doesn't pay profits for 20 years, but gives you $10B every year after those 20 years? That's an expected dividend. What is the DCF available to shareholders of a company that never pays a dividend? Nothing.
- zarkov99 6y agoWhen has that ever happened to lowly stock holders?