Pipedream24 said:
RVDondaPC said:
Grimes said:
RVDondaPC said:
Grimes said:
RVDondaPC said:
Grimes said:
Some successful companies give dividends, others do not. Some bad companies give dividends, others do not. I don't really see how that is relevant to this argument.
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Because everytime a company pays out a dividend it is paying out a piece of value from the company which decreases the Market Cap of that company. If they did not pay out a dividend then the market cap of that company would be much higher than it is.
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There are plenty of successful companies that pay out dividends. If there was such a strong correlation, the market would adjust to it.
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The market does adjust for it. Everytime A company pays out a dividend the stock price drops that amount on the execution date for that given dividend. It can go up or down from there depending on all kinds of things, but the market does adjust for it. So if a company paid out a $.50 dividend on April 9th then at the open of the market on April 9th the stock of that company will be $.50 lower than where it was before the open of the market. Thus affecting the Market Cap value of that company. Whether the stock goes up or down after that adjustment depends on other factors, but the market does adjust for dividend pay outs.
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That's not adjustment based on how people think the company will perform, nor does it have much impact on how a company operates.
I just don't see how any of this is relevant to the discussion at hand. If there is any impact from dividends, it is miniscule compared to other factors such as innovation and sound management.
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They were using Market Cap as the way to determine the size of a company. Do you even know how market cap is determined? It's the price of the stock times the number of shares. What I stated is a DIRECT effect on market cap because the stock price goes lower. You can't get any more direct than that. You only proved my point. That dividends don't have an impact on how a company operates(though it limits it's capital to invest) but it does have a direct impact on the Market Cap of the company. Thank you.
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You are correct on that a stock will generally go down in value the day a dividend is paid, but you are forgetting that generally the same stock will go up before the ex-dividend date. It kind of balnaces things out.
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I'm not talking about the stock price through out the day, I'm talking about the automatic drop in price equal to the dividend. Where the price goes from there depends. Some stocks shoot right back up by the end of the day, other stocks go down a lot further. But yeah the stock price on average balances out but it's balancing out at the same time that money is being sucked out of the company and given to stock holders. If the stock price is balancing out with that happening imagine what the stock price would do if that dividend money was kept by the company. The stock price would keep going up, increasing the market cap of that company. That's why companies like Verizon can keep cranking out big earning all the while their market cap goes up and down and in the long run has actually decreased over the past 10 years. It's because they keep dishing out big dividends. If Verizon didn't pay a dividend I would bet their stock price (and market cap) would be around double what it is now.
