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Has it always been this way? I’m not that well versed in stock market history, but I hear it claimed that when companies gave out regular dividends, then the st

Has it always been this way? I’m not that well versed in stock market history, but I hear it claimed that when companies gave out regular dividends, then the stock price would be correlated to (present and future) performance, as that gets reflected in dividend payments. But something tells me that this might be rose-colored glasses, and it has always been a pyramid scheme at some level.

gruez 6y ago
> Has it always been this way? I’m not that well versed in stock market history, but I hear it claimed that when companies gave out regular dividends, then the stock price would be correlated to (present and future) performance, as that gets reflected in dividend payments. no, because dividends are equivalent to buybacks.
- lowpro 6y ago
  That's not true from any perspective. At the end of a buyback the company owns more of its own shares, and investors own less. The company bought something for its money. Dividends are payments to those who own shares, and the company does not own more of anything after a Dividend pay out.
  - gruez 6y ago
    >At the end of a buyback the company owns more of its own shares, and investors own less No, they own the same amount (as a group, proportionally), and each remaining shareholder owns more. Furthermore, the shareholders (as a group that owned the stock before the buyback was done) does get paid, because some of the shareholders sold their stake for cash. >Dividends are payments to those who own shares, and the company does not own more of anything after a Dividend pay out. Dividend payments aren't free. In fact, you can see that for dividend paying stocks, the share price steadily goes in the months leading up to a dividend payment, and on the dividend date it goes down roughly equal to the dividend paid.
    - unkulunkulu 6y ago
      > Dividend payments aren't free. In fact, you can see that for dividend paying stocks, the share price steadily goes in the months leading up to a dividend payment, and on the dividend date it goes down roughly equal to the dividend paid. I thought it was a matter of math: company gave away some amount of money per share so it should have lost exactly that amount in valuation, what’s the catch?
      - kgwgk 6y ago
        Taxes are one of the reasons why the decline in price due to the dividend distribution may not be exactly equal to the amount distributed. And of course the decline in price due to the dividend distribution cannot be measured.
      - deleted 6y ago
        [deleted]
  - deleted 6y ago
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  - kgwgk 6y ago
    > At the end of a buyback the company owns more of its own shares, and investors own less. The company bought something for its money. Treasury shares can be ignored for most purposes and are often destroyed.

gruez 6y ago

> Has it always been this way? I’m not that well versed in stock market history, but I hear it claimed that when companies gave out regular dividends, then the stock price would be correlated to (present and future) performance, as that gets reflected in dividend payments. no, because dividends are equivalent to buybacks.

lowpro 6y ago
That's not true from any perspective. At the end of a buyback the company owns more of its own shares, and investors own less. The company bought something for its money. Dividends are payments to those who own shares, and the company does not own more of anything after a Dividend pay out.
- gruez 6y ago
  >At the end of a buyback the company owns more of its own shares, and investors own less No, they own the same amount (as a group, proportionally), and each remaining shareholder owns more. Furthermore, the shareholders (as a group that owned the stock before the buyback was done) does get paid, because some of the shareholders sold their stake for cash. >Dividends are payments to those who own shares, and the company does not own more of anything after a Dividend pay out. Dividend payments aren't free. In fact, you can see that for dividend paying stocks, the share price steadily goes in the months leading up to a dividend payment, and on the dividend date it goes down roughly equal to the dividend paid.
  - unkulunkulu 6y ago
    > Dividend payments aren't free. In fact, you can see that for dividend paying stocks, the share price steadily goes in the months leading up to a dividend payment, and on the dividend date it goes down roughly equal to the dividend paid. I thought it was a matter of math: company gave away some amount of money per share so it should have lost exactly that amount in valuation, what’s the catch?
    - kgwgk 6y ago
      Taxes are one of the reasons why the decline in price due to the dividend distribution may not be exactly equal to the amount distributed. And of course the decline in price due to the dividend distribution cannot be measured.
    - deleted 6y ago
      [deleted]
- deleted 6y ago
  [deleted]
- kgwgk 6y ago
  > At the end of a buyback the company owns more of its own shares, and investors own less. The company bought something for its money. Treasury shares can be ignored for most purposes and are often destroyed.