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Cake day: July 6th, 2023

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  • ammonium@lemmy.worldtoMicroblog Memes@lemmy.worldLine go up
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    2 months ago

    There are plenty of companies that never pay dividends, yet people buy them.

    II struggled with this as well for a while. You can look at it this way, they are worth money because they could pay dividends, but they don’t actually have to. Your bar of gold is worth a certain amount of money equal to the money you could sell it for, and your money is worth something because you could buy something with it.


  • ammonium@lemmy.worldtoMicroblog Memes@lemmy.worldLine go up
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    2 months ago

    Because that’s how the stock market works, the price of a stock is the current value of assets (including cash) + expected earnings (with some correction factors for risk and time). If the company pays out $x of cash it’s $x worth less. You might not always see it it the stock price because expected future dividend payments are also already priced in.

    How do you think it works?


  • ammonium@lemmy.worldtoMicroblog Memes@lemmy.worldLine go up
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    2 months ago

    Imagine you have 10 stocks worth $10 each.

    Scenario 1: There is $1 dividend per stock. You now have 10 stocks worth $9 each for a total of $90 in stocks and $10 in cash.

    Scenario 2: There is no dividend but you decide to sell 1 stock, you now have 9 stocks of $10 for a total of 90$ in stocks and $10 in cash.

    These scenario’s are equivalent unless the stock wasn’t priced correctly.