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.
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?
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.
It's threads like this that cause economic meltdowns.
What wouldn't seem right would be if there were no bad bets. In something as risky as tech startups, most bets should be bad.
Other mature tech companies not paying dividends include Adobe, Autodesk, Apple, Cisco, EA, Activision, Intuit, Oracle, Symantec, Amazon, and Ebay. And the few that do pay dividends (IBM, HP, and Microsoft for instance) have a very low dividend yields. It seems to me that there has been a breakdown of corporate governance.
Adobe, for instance, is in the perfect position to pay dividends. It is a group of cash cows that might suddenly get destroyed by new market entrants. They're putting the money in a vault [1], but they're not paying dividends [2].
The problem, as I see it, is that companies refuse to admit they're dying. It's the weirdest thing.
[1] http://finance.google.com/finance?q=adbe [2] http://sec.edgar-online.com/2008/04/04/0001047469-08-004108/...
Let's see here. Google pays no dividends, is probably to large to be bought, won't be allowed to merge for antitrust reasons, and if it behaves like other Silicon Valley companies that came and went, will spend every last penny before acknowledging defeat (which granted, is a long way off).
Unless Google pays dividends at some point (which Silicon Valley companies usually do not do), then yes, it's stock is worthless. That's exactly what I'm saying. Its stock buys and sells at $441.41 as of my writing this, but is intrinsically worthless.
as worthless as any other paper currency. indeed google stock has performed well against the US dollar (you could redeem your GOOG into euros).
no fiat currency has intrinsic value. come to grips with this. paper currencies have come and gone, stocks are no different than dollars or euros...its just a piece of paper that people will either value high, low, or not at all
You need to look at this from a 'whole' perspective. You can make money from buying high selling low, but the market cannot.
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.
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