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Dividends are only one way to value to companies. If Apple fired everyone tomorrow and stopped selling products, their stock would still have value because of t
by cmbaus 13y ago
Dividends are only one way to value to companies. If Apple fired everyone tomorrow and stopped selling products, their stock would still have value because of the cash (and real estate, etc) they have on the books.
Buffet basically assumes that he is a better investor than his shareholders and by not paying taxes twice (corporate and individual) on dividends he will do better investing the profits and growing book value than his shareholders. Pretty good assumption so far.
- btilly 13y agoActually, no. Dividends don't give companies value. (In fact every time you pay one, your stock price drops by the amount of the dividend.) They return value to shareholders. Yes, you're right about Buffet. And because the market is indifferent about when money gets redistributed, they are happy at this point to pay around $100K/share despite those shares having value tied up in a company that has shown very little willingness to distribute any earnings to investors.
- chronic25 13y agoFalse. Stock price will increase when an (unexpected) dividend is announced. An investor will gladly pay $1.50 extra for the stock right now if they will receive a $2 dividend in the future. Keep in mind that the dividend announcement date is different from the payment date. But you are correct that dividends do not add value to the company. The stock price increases by $2 but the company pays out $2.