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I started to close this as a duplicate of If a stock doesn't pay dividends, then why is the stock worth anything?, but then realized that it is a slightly different question: suppose a stock price were to continuously drop despite high company performance (profits)... Is there something the shareholders can do to get some share of the profits? As a ...


21

There is not a direct advantage (meaning that do not produce actual wealth as you mention), but it can be an indication that the company is a good stable investment. If a company pays dividends, then typically that means that the company is healthy enough (has enough excess cash flow) that it can redistribute it to shareholders rather than investing it back ...


13

Ultimately, if you own the company, you can vote to shut down the company, sell everything it owns and give the money to the shareholders. You can also vote for the company to start paying dividends. Basically, the money in the company is not locked in the company, even if it's staying there for the time being. Eventually the shareholders will get some of ...


8

It avoids building castles in the air Extremely simplified: there are two factors contributing to a stock price. The first part is a fundamental value, based on the company's earnings, its dividend, the expected future growth. Analysts make this look like an exact science by computing two digits behind the comma but it is not. Predictions about the future ...


8

No, your analogy is not the same as buying a non-dividend-paying stock. A better analogy would be you buy 50% of a house where the profits all go in a bank account that you "own" half of but can't withdraw from (and neither can the other owner). All you can do is sell your ownership to someone else or wait until the money eventually does get ...


7

They had a lot of free advertisement on the international press and the web. People like me, who never heard of GameStop before, now know what they sell (used games, consoles, etc.), how they do it (at physical stores, but planning to sell more online), that they have many fans, the usual value of their stock, that they are having to close stores, and much ...


7

So my question is... suppose a stock price were to continuously drop despite high company performance (profits)... Is there something the shareholders can do to get some share of the profits? This seems like a faulty premise. The stock price is based on the market's estimate of the company's future prospects. It's unlikely that a company that has high ...


6

This is a really common idea that I've seen lately. It's usually part of a rationalization about how owning stock in a company is no different than owning something that is only worth what someone will pay you for it e.g. Bitcoin. There are lots of ways to debunk this but I think the easiest way to see why this isn't (normally) the case is to ignore large ...


5

Dividends and speculation aren't the only upsides to owning a stock. The company could decide to execute a stock buyback. This will increase demand for the stock you own and drive up the price. The company could be acquired, raising the stock price substantially. The company could decide to start paying dividend. The shareholder could vote to alter the ...


5

Just for clarification, a stock's share price drops by the exact amount of the dividend on its ex-dividend date. When trading begins anew that morning, the stock may go up, down or be unchanged. You are correct. Investors just break even each time a dividend is issued because the value of their equity goes down by the same amount as the dividend. A ...


4

Not all stocks pay dividends. Remember that stocks represent ownership of a company. If a company issues 1,000 shares of stock and you own 100 of them, you own 10% of the company. A dividend is when a company decides to give some of its cash to the owners of the company (rather then using it to grow the company). If the same company above gave $10,000 in &...


3

There's no intrinsic connection between the stock price and actual company profits without dividends. That is not true. If the stockholders are voting in Directors who don't give dividends, it can only be because the stockholders are made even better off by the absence of dividends than they would be if there were dividends. The company's profits as ...


3

A company's share price typically has 2 impacts on its internal operations: (1) If it needs additional funding to accomplish its goals [like expanding to new locations], then it could do that by (i) waiting for accumulation of net earnings to fund expansion; (ii) take on more debt; or (iii) offer additional equity [like more shares offered to the market]. ...


3

A stock dividend means that you receive additional shares in the company instead of cash and they are not taxed until the shares are sold. Like stock splits, stock dividends dilute share price. They do not increase shareholder wealth or market capitalization. There's no difference unless there's a conditional attachment that requires that the stock ...


3

Bermuda is not an independent country but a British Overseas Territory. This page from PricewaterhouseCoopers says that "there are no withholding taxes in Bermuda". Whether that is enough for you is for you to decide.


3

Companies can reduce or suspend dividends at any time prior to the next date of record.This is done in order to preserve cash when capital in difficult market times. In 2020, many well known companies did so due to Covid (OXY, CCL, WYNN, MAR, F, BA, DAL, BUD, et al).


2

No dividend There are several points here. Let's take each one. First, an enterprise with zero dividends is priced as zero in a dividend discount model (DDM). Let me repeat the last part: in a dividend discount model. This is an "all models are wrong, some are useful" situation. There are several pricing models over there, and you need to choose ...


2

That's not how splits (or dividends) work. If you own one share of stock worth $100 and it does a 4-1 split, you will (eventually) have 4 shares worth $25 each. Anyone who buys stock before the split is effective gets the $100 shares; anyone who buys shares after the split is effective gets $25 shares. There's no arbitrage opportunity. Same for a dividend. ...


2

"a stock's share price typically goes down on its ex-dividend date by the amount of the dividend" yes, and theoretically it would stay there for a longer sustained period of time. but the market is irrational and moves commensurate to collective human emotion. so in practice, after the market price per share drops at 9:30 AM on the ex-dividend ...


2

What you are missing is that the price of the stock tends to rise the amount of the dividend between the announcement and the ex-dividend date as explained in this article the section titled The Effect of Dividend Declaration on Stock Price. This has been shown to be empirically true in many academic studies. In addition, this increase is 'real' i.e. it's ...


2

The fundamental value of GameStop hasn't changed at all, so let's assume it is $20 per share. What you have to pay to get one share has changed dramatical, say $100 per share. So GameStop could issue say 20% new shares. In normal times they could sell them for $20 per share, increasing the fundamental value by 20% and the number of share holders by 20%, so ...


1

After some period of operating the business, the managers of the company look at their books, and make a positive decision to take some cash they have access to (*), and distribute it to the owners of the company. The management identifies the total amount of cash to distribute. They then divide this by the total quantity of shares owned by the owners. ...


1

and you know I would never sell it? You can't know that, and I can still sell my share in your house, and that's where your analogy falls apart.


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