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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 sta
by 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 agoI 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 agoWithout 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