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> Think of a share of AAPL, for a moment, as being the combination of two things: the ownership of a tiny sliver of Apple, and a bet that Apple will increase i

> Think of a share of AAPL, for a moment, as being the combination of two things: the ownership of a tiny sliver of Apple, and a bet that Apple will increase in size. That's not accurate though. It's a bet that the expectation of future dividends from the stock will rise. Popular stocks these days don't really do dividends, but that's because they can better spend the money to grow rather than pay out. But there's still the general sense it might happen eventually and that's why it somewhat makes sense to give these companies high valuations. A fake share has a guaranteed lifetime dividend of $0.

iudqnolq 5y ago
This is complete nonsense. For example, Berkshire Hathaway plans to probably not issue dividends. https://www.investopedia.com/ask/answers/021615/why-doesnt-berkshire-hathaway-pay-dividend.asp#:~:text=Despite%20being%20a%20large%2C%20mature,projects%2C%20investments%2C%20and%20acquisitions https://www.investopedia.com/ask/answers/021615/why-doesnt-b....
- spywaregorilla 5y ago
  > In particular, Buffett prefers to reinvest profits in the companies he controls in order to improve their efficiency, expand their reach, create new products and services, and improve existing ones. > In one of his famous letters to shareholders, Buffett said that perhaps Berkshire Hathaway might institute a dividend 10 or 20 years down the road. This was in 2018 when Buffett was 88. This article just reiterates exactly what I said. Berkshire can do better than just giving money back to shareholder by investing the money in itself. The reason shareholders are ok with this is because the growth fuels the potential for larger future dividends. Even if the company grows until the heat death of the universe, the logic behind increasing the valuation of the company is that the ability of a company to give dividends has theoretically increased. You don't need to bet on actually receiving them. But the stock has value because if the company stops growing, the company will pay out instead. If it were all about size, then a shrinking company would have negative value. This is obviously incorrect.

iudqnolq 5y ago

This is complete nonsense. For example, Berkshire Hathaway plans to probably not issue dividends. https://www.investopedia.com/ask/answers/021615/why-doesnt-berkshire-hathaway-pay-dividend.asp#:~:text=Despite%20being%20a%20large%2C%20mature,projects%2C%20investments%2C%20and%20acquisitions https://www.investopedia.com/ask/answers/021615/why-doesnt-b....

spywaregorilla 5y ago
> In particular, Buffett prefers to reinvest profits in the companies he controls in order to improve their efficiency, expand their reach, create new products and services, and improve existing ones. > In one of his famous letters to shareholders, Buffett said that perhaps Berkshire Hathaway might institute a dividend 10 or 20 years down the road. This was in 2018 when Buffett was 88. This article just reiterates exactly what I said. Berkshire can do better than just giving money back to shareholder by investing the money in itself. The reason shareholders are ok with this is because the growth fuels the potential for larger future dividends. Even if the company grows until the heat death of the universe, the logic behind increasing the valuation of the company is that the ability of a company to give dividends has theoretically increased. You don't need to bet on actually receiving them. But the stock has value because if the company stops growing, the company will pay out instead. If it were all about size, then a shrinking company would have negative value. This is obviously incorrect.