4 ms·

i am probably more bearish than anyone here, but there is no evidence that dividend-bearing stocks do better over any meaningful timeframe

deleted 18y ago
[deleted]
helveticaman 18y ago
The question is not one of doing better, but of inevitability; for a company's stock to be worth anything, it has to pay profits out to the stockholder. This can mean dividends or an eventual lump sum when the company winds down. The problem is the latter never happens because companies never want to admit they are dying. On top of that, every company dies; just in 2006 the oldest company in the world, Kongo Gumi, went under after operating continuously since 578. The stock price is, in theory, the net present value of the stream of earnings its bearer will receive. So if no company will ever pay significant monies when it winds down, that leaves dividends (edit: now that I think about it, getting acquired counts too). I have no evidence to show dividend-bearing stocks outperform their counterparts, but my point is that those counterparts are overvalued. If a company will never be bought, will never pay dividends, and will never wind down operations rather than face bankruptcy, the net present value of its stock is therefore 0. *http://en.wikipedia.org/wiki/Kong%C5%8D_Gumi http://en.wikipedia.org/wiki/Kong%C5%8D_Gumi
- quasimojo 18y ago
  The question is not one of doing better, but of inevitability; for a company's stock to be worth anything, it has to pay profits out to the stockholder so google is worthless? the point of owning a share is to make money from your ownership. if that comes through dividends or through sale value, who cares? I have no evidence to show dividend-bearing stocks outperform their counterparts, but my point is that those counterparts are overvalued do you know what fair value is? the price the equity is currently trading at. look at MSFT. a total dog but wheee...look, they cut me a check a few times a year and i take the wife to a movie. and why do dividends imply value? maybe microsoft could have taken the dividend cash and used it to buy out google. excess cash is often seen as a LIABILITY, as it shows the firm cannot use the money to effectively grow. MSFT is a classic example...losing market share even though they have a mountain of cash. The stock price is, in theory, the net present value of the stream of earnings its bearer will receive. So if no company will ever pay significant monies when it winds down, that leaves dividends no, stocks get delisted before they go under, and you get bupkus. how are your LEH dividends doing?
  - netcan 18y ago
    the point of owning a share is to make money from your ownership. You need to look at this from a 'whole' perspective. You can make money from buying high selling low, but the market cannot.
  - bokonist 18y ago
    Can you tell me the difference between owning a share of Google and owning a baseball card? A share in Google currently gives you no claim to Google's profits. Nor does it give you any voting rights or control over management. So then what the heck is it good for? Now, baseball cards can be quite valuable. The price can fluctuate enormously, You can make money from investing in them. The price correlates with real world events such as batting average. But fundamentally, the value is based purely on fads, perception, herd behavior, and marketing. At any time, the floor can drop out. The price can plummet and never recover ( baseball cards were my first investing experience and I'm still scarred :-) ) A dividend paying stock has fundamental value. As long as the company's business remains strong, you will earn money from owning the stock, even if everybody else in the world believes it is worthless.
    - netcan 18y ago
      It's very important not to think about all this to much. Stocks go up. It's all very complicated. You should leave it to the pros who take care of your retirement fund. It's threads like this that cause economic meltdowns.
      - MaysonL 18y ago
        +1 Funny.
    - quasimojo 18y ago
      you are just moving the argument. are the dollars you get paid in dividends intrinsically valuable? no. people could value dollars to zero at any time. you are just replacing one piece of paper with another.
    - pg 18y ago
bokonist 18y ago
In previous eras, mature companies paid dividends and growth stocks made up for their lack of dividends with growth. When a growth company matured it would start paying dividends. Thus the ROI on investing in mature companies versus growth companies was about equal. The recent trend is that mature companies are not paying dividends. This trend is new enough that it probably hasn't shown up in performance statistics. But it is very worrisome on a fundamental level. A stock like Yahoo! or Alcatel has little room for its price to grow, thus you can only make a return via dividends. Without dividends, owning it is almost certain to be a losing proposition.
- sethg 18y ago
  I suspect that if these companies did declare dividends, they would be effectively announcing to the market that they didn't expect to be growing very much. And then investors would dump the stocks, because the high P/E ratios can only be justified by an expectation of future growth.
- quasimojo 18y ago
  Without dividends, owning it is almost certain to be a losing proposition. look up short selling, options. if a stock price is MOVING, you can profit dividends are the only way to make money if the share price is static
neovive 18y ago
It also depends on how the company reinvests the profits that could be distributed to shareholders. Quality R&D for future growth or frivolous buyouts and expenditures that serve to prolong a company when its core business is no longer growing.

deleted 18y ago

[deleted]

helveticaman 18y ago

The question is not one of doing better, but of inevitability; for a company's stock to be worth anything, it has to pay profits out to the stockholder. This can mean dividends or an eventual lump sum when the company winds down. The problem is the latter never happens because companies never want to admit they are dying. On top of that, every company dies; just in 2006 the oldest company in the world, Kongo Gumi, went under after operating continuously since 578. The stock price is, in theory, the net present value of the stream of earnings its bearer will receive. So if no company will ever pay significant monies when it winds down, that leaves dividends (edit: now that I think about it, getting acquired counts too). I have no evidence to show dividend-bearing stocks outperform their counterparts, but my point is that those counterparts are overvalued. If a company will never be bought, will never pay dividends, and will never wind down operations rather than face bankruptcy, the net present value of its stock is therefore 0. *http://en.wikipedia.org/wiki/Kong%C5%8D_Gumi http://en.wikipedia.org/wiki/Kong%C5%8D_Gumi

quasimojo 18y ago
The question is not one of doing better, but of inevitability; for a company's stock to be worth anything, it has to pay profits out to the stockholder so google is worthless? the point of owning a share is to make money from your ownership. if that comes through dividends or through sale value, who cares? I have no evidence to show dividend-bearing stocks outperform their counterparts, but my point is that those counterparts are overvalued do you know what fair value is? the price the equity is currently trading at. look at MSFT. a total dog but wheee...look, they cut me a check a few times a year and i take the wife to a movie. and why do dividends imply value? maybe microsoft could have taken the dividend cash and used it to buy out google. excess cash is often seen as a LIABILITY, as it shows the firm cannot use the money to effectively grow. MSFT is a classic example...losing market share even though they have a mountain of cash. The stock price is, in theory, the net present value of the stream of earnings its bearer will receive. So if no company will ever pay significant monies when it winds down, that leaves dividends no, stocks get delisted before they go under, and you get bupkus. how are your LEH dividends doing?
- netcan 18y ago
  the point of owning a share is to make money from your ownership. You need to look at this from a 'whole' perspective. You can make money from buying high selling low, but the market cannot.
- bokonist 18y ago
  Can you tell me the difference between owning a share of Google and owning a baseball card? A share in Google currently gives you no claim to Google's profits. Nor does it give you any voting rights or control over management. So then what the heck is it good for? Now, baseball cards can be quite valuable. The price can fluctuate enormously, You can make money from investing in them. The price correlates with real world events such as batting average. But fundamentally, the value is based purely on fads, perception, herd behavior, and marketing. At any time, the floor can drop out. The price can plummet and never recover ( baseball cards were my first investing experience and I'm still scarred :-) ) A dividend paying stock has fundamental value. As long as the company's business remains strong, you will earn money from owning the stock, even if everybody else in the world believes it is worthless.
  - netcan 18y ago
    It's very important not to think about all this to much. Stocks go up. It's all very complicated. You should leave it to the pros who take care of your retirement fund. It's threads like this that cause economic meltdowns.
    - MaysonL 18y ago
      +1 Funny.
  - quasimojo 18y ago
    you are just moving the argument. are the dollars you get paid in dividends intrinsically valuable? no. people could value dollars to zero at any time. you are just replacing one piece of paper with another.
  - pg 18y ago

bokonist 18y ago

In previous eras, mature companies paid dividends and growth stocks made up for their lack of dividends with growth. When a growth company matured it would start paying dividends. Thus the ROI on investing in mature companies versus growth companies was about equal. The recent trend is that mature companies are not paying dividends. This trend is new enough that it probably hasn't shown up in performance statistics. But it is very worrisome on a fundamental level. A stock like Yahoo! or Alcatel has little room for its price to grow, thus you can only make a return via dividends. Without dividends, owning it is almost certain to be a losing proposition.

sethg 18y ago
I suspect that if these companies did declare dividends, they would be effectively announcing to the market that they didn't expect to be growing very much. And then investors would dump the stocks, because the high P/E ratios can only be justified by an expectation of future growth.
quasimojo 18y ago
Without dividends, owning it is almost certain to be a losing proposition. look up short selling, options. if a stock price is MOVING, you can profit dividends are the only way to make money if the share price is static

neovive 18y ago

It also depends on how the company reinvests the profits that could be distributed to shareholders. Quality R&D for future growth or frivolous buyouts and expenditures that serve to prolong a company when its core business is no longer growing.