4 ms·

I truly don't understand what holding a share in a non-dividend company really gives you. Yes, it has perceived value and that company may not be profitable, bu

I truly don't understand what holding a share in a non-dividend company really gives you. Yes, it has perceived value and that company may not be profitable, but shouldn't the end game be to provide some sort of dividend to people who own part of the company?

fragmede 5y ago
End game, sure, but who's to say a given company is anywhere near their endgame. Outside observers only have outside observations and aren't privy to internally planning.
paxys 5y ago
Companies these days increase shareholder value by doing stock buybacks with their spare cash instead of giving dividends.
woodruffw 5y ago
I see the value in it as a speculative asset: if you think that the company will pay significant dividends in the future (or you expect that others will value it in the future for that or other reasons), then it makes sense as an investment. That being said, I think there's a healthy ratio between speculative and dividend-yielding investments, and the market (especially the tech market) is nowhere near that healthy ratio.
cercatrova 5y ago
When the stock price goes up, you make money. Dividends are one way of getting value out of a stock but not the only way of course.
__blockcipher__ 5y ago
The capacity for the company to pay a hypothetical dividend increases as the company generates more free cash flow. So that increases the value. You are hitting on a correct notion here though, which is that if the market totally went away - ie you held your shares but couldn't sell or buy - and you're an investor who owns .0001% of a megacorp and >50% of the shareholders won't vote to issue a dividend, then the security is worthless to you. Similarly, if the market does still exist but for whatever reason the company is "unfairly" valued extremely low by the market, then having dividends gives you an "anchor" to hold on to - at least your asset is giving you a 1% or a 3% or a [insert dividend yield here]% dividend while you wait for the market to value it fairly again - whereas without the dividend you've got nothing.

fragmede 5y ago

End game, sure, but who's to say a given company is anywhere near their endgame. Outside observers only have outside observations and aren't privy to internally planning.

paxys 5y ago

Companies these days increase shareholder value by doing stock buybacks with their spare cash instead of giving dividends.

woodruffw 5y ago

I see the value in it as a speculative asset: if you think that the company will pay significant dividends in the future (or you expect that others will value it in the future for that or other reasons), then it makes sense as an investment. That being said, I think there's a healthy ratio between speculative and dividend-yielding investments, and the market (especially the tech market) is nowhere near that healthy ratio.

cercatrova 5y ago

When the stock price goes up, you make money. Dividends are one way of getting value out of a stock but not the only way of course.

__blockcipher__ 5y ago

The capacity for the company to pay a hypothetical dividend increases as the company generates more free cash flow. So that increases the value. You are hitting on a correct notion here though, which is that if the market totally went away - ie you held your shares but couldn't sell or buy - and you're an investor who owns .0001% of a megacorp and >50% of the shareholders won't vote to issue a dividend, then the security is worthless to you. Similarly, if the market does still exist but for whatever reason the company is "unfairly" valued extremely low by the market, then having dividends gives you an "anchor" to hold on to - at least your asset is giving you a 1% or a 3% or a [insert dividend yield here]% dividend while you wait for the market to value it fairly again - whereas without the dividend you've got nothing.