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Can you explain how a $1 dividend on a $100 stock drops the price to $99? Theoretically wouldn’t the stock become more valuable, because its average returns hav
by glacials 4y ago
Can you explain how a $1 dividend on a $100 stock drops the price to $99? Theoretically wouldn’t the stock become more valuable, because its average returns have gone up? (As an extreme example, what if I gave a $1M dividend on that same stock?)
- neilc 4y agoThe assets of the company are exactly the same, except that $1*num-shares that was previously on the company's balance sheet is no longer there. The company is less valuable and so the stock goes down. Having an attractive dividend policy can make a stock more valuable to certain investors, but the act of actually paying out a scheduled dividend basically only makes the stock price go down.