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I'm confused why a shareholder would purchase shares in a stock that doesn't pay dividends.

  • They don't get part of the profits: Without dividends, when the company earns profits, the shareholder doesn't get any of that money directly.
  • They don't want to liquidate the assets: They own a share of the assets less liabilities, but presumably in most cases, unless they are dealing in bankrupt businesses, they don't buy a company with the intention of liquidating its assets.
  • They don't want to sell the business: They might value the assets as a way to sell the business to another business. But again, for instance, Amazon is not selling its business to another business. And yet people still want to buy shares of Amazon. So presumably an investor doesn't count on selling the business as their main form of return.

This seems to indicate if (1) the business does well, (2) continues to not pay a dividend, (3) and doesn't sell its business, then no direct payments of any kind will come to the investor.

This seems to reduce the financial value of owning shares down to strictly their trade value. It seems to me owning the business is then rather like owning trading cards. When you buy trading cards, you don't get money until you sell the card. Similarly, if you buy a stock under the above conditions, then you also don't get any money until you sell it. It would seem then, the primary value of the shares is other people want them and, the more people want them, the more valuable they get.

Am I missing something? What financial return do investors get when they buy shares in a company besides dividends, value of assets, and gains from changes in stock price? Is buying and selling the stock the main financial gain an investor gets from purchasing shares?

I'm excluding things like wanting "control" of the company as I can't see what financial value that brings other than influencing the decisions above.

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    Note that even dividends do not provide "return". They reduce the value of the company proportionally, so a $100 stock that pays a $5 dividend will be worth $95 after the dividend. They provide cash flow but not return.
    – D Stanley
    Commented Nov 4, 2021 at 18:02
  • They get a share of the assets when the company is liquidated in the future. If the stock price was less than the assets, someone could get a huge loan, buy all of Amazon, liquidate it, and pay back the loan and have some profit. Commented Nov 5, 2021 at 17:44
  • @DStanley great point. i mixed that up. thanks for clarifying Commented Nov 5, 2021 at 19:29
  • But, it doesn't answer your question - does the duplicate answer your question? If not, what part of your question does it not answer?
    – D Stanley
    Commented Nov 5, 2021 at 19:32
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    Your understanding is correct, the value is ultimately the prospect of liquidation somehow. The current worth is what someone else would pay for that future possibility. There is no way to extract the actual stock value from the company yourself. Whether you like that answer or not is another matter...
    – D Stanley
    Commented Nov 5, 2021 at 20:36

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