Re:Report on Stablecoins [pdf]
by dragontamer on Monday November 01, 2021 @11:28PM
(#29076614)
Because its more tax-efficient to reinvest the gains back into the company in most cases.
But if the stock ever crashed to say: the value of the expected dividend... it would make more sense to pay out the dividend rather than invest.
Lets say a company's stock price is $40, and they make $2 per stock of profit one year. They can give out the dividend... or... they can reinvest the money into the company (and theoretically: if the stock market reacts correctly, it would raise the price of the stock to $42).
In contrast: if the stock market fails to react like this, eventually the company will be say: $2 per share. They'll still be making $2 in profits each year however (assuming the fundamentals haven't changed). At this point, it makes sense to pay out a dividend of $2, if their stock price doesn't react.
After all: might as well double your money each year at that point. (Take those $2 dividend, then double your number of shares in the company, then receive double the money next year).
But if the stock ever crashed to say: the value of the expected dividend... it would make more sense to pay out the dividend rather than invest.
Lets say a company's stock price is $40, and they make $2 per stock of profit one year. They can give out the dividend... or... they can reinvest the money into the company (and theoretically: if the stock market reacts correctly, it would raise the price of the stock to $42).
In contrast: if the stock market fails to react like this, eventually the company will be say: $2 per share. They'll still be making $2 in profits each year however (assuming the fundamentals haven't changed). At this point, it makes sense to pay out a dividend of $2, if their stock price doesn't react.
After all: might as well double your money each year at that point. (Take those $2 dividend, then double your number of shares in the company, then receive double the money next year).