Why Companies Pay Dividends

mathjak107 · Sep 13, 2022

I stated it over and over in my example of the stock doubling .

you sir just don’t read

oldmontana · Oct 8, 2022

Aunt Bea said:
IMO there is absolutely nothing wrong with investing in mature companies that have a solid track record of paying dividends, as opposed to investing in companies primarily focused on growth.

Some people believe that is the difference between investing and speculating.

I choose to do a little of both.

The important thing is that we invest in things we understand and are comfortable with.

“A cow for her milk
A hen for her eggs,
And a stock, by heck,
For her dividends.” - John Burr Williams

With the market down I am happy that I have many dividend paying companies. The dividends companies are continuing to pay the same $'s as they did before the stock market dive. It gives me money to spend or reinvest.

I look for my stocks to come back in 6 months, one year, or two years. Till then I will sit back and watch the dividends come in.

mathjak107 · Oct 8, 2022

Would you say the same thing pulling money out of your portfolio while its down ?

surprise , there is no difference …dividends are withdrawals from your invested dollars …there is no difference spending those dividends vs pulling the same dollars out of your account.

you can draw the same dollars out of any money you have in anything ….you are just as down as any other stock and down even more after the payment or withdrawal.
this is the myth many buy in to because they don’t understand exactly what these withdrawals called dividends really are or what they represent.

don’t believe for a second you are in any better shape because the company is making that withdrawal for you

oldmontana · Oct 8, 2022

oldmontana said:
don’t believe for a second you are in any better shape because the company is making that withdrawal for you

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I will give you credit for your same old song and dance about dividends.

My dividend paying stocks are up today after the hit on stocks 30% to over 300% of the price I purchased them at. That does not account for the dividends I have recieved.

If you do not want to share in the profits of companies so be it. FYI..Companies decide what they will do with their profits. Most if not all that pay dividends do not, yes do not pay all their profits to stockholders

mathjak107 · Oct 8, 2022

Stop with your nonsense ..dividends are just cash returned to you from the company cash register and subtracted off your balance …..they are nothing you can’t do yourself from a portfolio of non div payers

You repeat the same misinformation over and over .all that matters is your total return , not how you withdraw that money out..

I have fidelity funds down only 13% ytd that pays almost no dividends while dividend paying spy is down 22% or so.

so it is about total return not how much is Withdrawn as a dividend

oldmontana · Oct 8, 2022

mathjak107 said:
Stop with your nonsense ..dividends are just cash returned to you from the company cash register and subtracted off your balance …..they are nothing you can’t do yourself from a portfolio of non div payers

You repeat the same misinformation over and over .all that matters is your total return , not how you withdraw that money out..

I have fidelity funds down only 13% ytd that pays almost no dividends while dividend paying spy is down 22% or so.

so it is about total return not how much is Withdrawn as a dividend

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.dividends are just cash returned to you from the company cash register and subtracted off your balance

"subtracted off your balance"

That is not true . You continue to post again and again how little you understand why companies pay dividends.

mathjak107 · Oct 9, 2022

Sorry ,it is you that does not understand a dividend is a withdrawal of your own existing funds .

it is not profits , it is an amount designated by a board .

it can come from borrowed money , asset sales , profits , or any source the company chooses ..it is not giving you a penny more then you had existing before it went ex div ..it is a withdrawal .

companies can lose money for years and pay out .

so please stop posting misinformation..it is bad enough you don’t understand it is giving you nothing and is subtracted from your dollars being compounded on without misleading others

mathjak107 · Oct 9, 2022

oldmontana said:
You posted.."More nonsense .no one said a stock doesn’t go up because it pays a dividend ."
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No, but your link does not mention that FACT, and you as far as I have read in your posts do not mention that. You just go on and on about why div's are not good.

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You posted.."if you understood the basics you would realize how ridiculous you saying but my stocks are higher over the years is ."

That is a fact. Call it what you want. By doing so its telling.

Enough is enough.

oldmontana said:
Bye!

I have been spending down my portfolio to live for more than 7 years taking withdrawals and it is higher today then the day I retired

Dividends or not has nothing to do with investments being worth more then they were
They would be just worth more then they are without withdrawals from spending dividends or share value

mathjak107 · Oct 9, 2022

More gibberish ..

Dividend income is taxed on the entire dividend …when THE SAME INCOME is generated via gains instead you only pay tax on the gain portion not the entire amount like the dividend .

So your tax comparison above is the opposite then you said with dividends taxed higher ..

One can draw the same income from a portfolio in good and bad times and have the same balance .
The company taking a share price hit with every dividend payout in addition to the market hits in a down market are just as painful .

You just keep showing your financial ignorance with each post

Timewise 60+ · Oct 9, 2022

If you are an investor, and the only thing you look at in the stock market is 'dividends' you will miss the many other opportunities available to prudent investors.

I agree with others, you have made you point on dividends! Move on...

mathjak107 · Oct 9, 2022

It isn’t even a case of good stock or bad stock to buy or own .

it is a case of misthinking if one thinks nothing is being sold off from your account to pay out that dividend in a down market .

it is no different then taking money out of your portfolio in a down market .

it comes right out of the company cash register and on top of the market action , your dollars invested are reduced down farther automatically by the same amount withdrawn ..

since markets compound on dollars you are no different with that new lower balance starting out then someone first buying in with that same amount of money.

that payment is not on top of your balance you had , it is subtracted out and handed to you and your balance reduced by the same.

there is no such thing as getting paid to wait .

you see how many here don’t understand how things work yet argue with misinformation

at&t is paying a 7-1/2% dividend and including dividends is down 24% the last year …so much for the myth getting paid to wait

oldmontana · Oct 10, 2022

Timewise 60+ said:
If you are an investor, and the only thing you look at in the stock market is 'dividends' you will miss the many other opportunities available to prudent investors.

I agree with others, you have made you point on dividends! Move on...

That is true.

The thing is that a company has to do something with their profits. There are many ways they can use that money like paying dividends and expanding the company or like one poster keeps saying is to cushion their balance sheet by increasing their cash on hand.

Most companies understand that when a person purchase a part of their company with stock that pay dividends they expect to get dividends. I do.

mathjak107 · Oct 10, 2022

Stock buybacks were the best thing they could do coffee it was a choice of that or a dividend

paying it as a dividend gave shareholders no extra money that they did not have the night before the ex div . It drives a stock price down by an equal amount before it can trade

on the other hand a stock buy back increases share prices most of the time as less shares are available to the public

oldmontana · Oct 11, 2022

mathjak107 said:
coffee

mathjak107 said:
Stock buybacks were the best thing they could do coffee it was a choice of that or a dividend

paying it as a dividend gave shareholders no extra money that they did not have the night before the ex div . It drives a stock price down by an equal amount before it can trade

on the other hand a stock buy back increases share prices most of the time as less shares are available to the public

===========================
coffee?

https://www.msnbc.com/rachel-maddow...leaders-remain-literally-speechless-rcna51479

How Will the Buyback Affect Your Company’s Value?

Contrary to the common wisdom, buybacks don’t create value by increasing earnings per share. The company has, after all, spent cash to purchase those shares, and investors will adjust their valuations to reflect the reductions in both cash and shares, thereby canceling out any earnings-per-share effect. If increasing earnings per share were the only rationale for buybacks, they would have no impact on value—which, as we’ve seen, is certainly not the case

mathjak107 · Oct 11, 2022

oldmontana said:
===========================
coffee?

https://www.msnbc.com/rachel-maddow...leaders-remain-literally-speechless-rcna51479

How Will the Buyback Affect Your Company’s Value?
Contrary to the common wisdom, buybacks don’t create value by increasing earnings per share. The company has, after all, spent cash to purchase those shares, and investors will adjust their valuations to reflect the reductions in both cash and shares, thereby canceling out any earnings-per-share effect. If increasing earnings per share were the only rationale for buybacks, they would have no impact on value—which, as we’ve seen, is certainly not the case

Not how things seem to actually play out with buy backs in actual studies.

what the studies showed

Greater Liquidity: Companies repurchasing stock provides substantial liquidity that facilitates orderly trading and reduces transaction costs for retail investors.
Reduced Volatility: Stock buybacks significantly reduce realized and anticipated return volatility. Imposing limitations on buyback activity would increase stock market volatility and force retail investors to bear greater amounts of downside risk.
Retail Investors Impact: Stock buybacks generate an economically large benefit for retail investors. Since 2004, buybacks have saved retail investors $2.1–4.2 billion in transaction and price impact costs.
Proactive Repurchase Activity: Managers utilize market-based estimates of future volatility to inform their buyback decisions. When volatility is expected to be higher, managers increase their buyback intensity to stabilize stock prices, thus reducing costs for retail investors.
Response To Uncertainty: Studies show that economic policy uncertainty increases stock price volatility and illiquidity. Managers respond to elevated policy uncertainty by strengthening their buyback activities. Retail investors benefit from price certainty about the value of their investments during periods of greater uncertainty.
Strategic Liquidity Supplier: Managers expand stock buyback activity during critical periods when investors sell relatively large amounts of shares. Thus, managers use buybacks to actively mitigate price pressure during periods of net selling pressure.

https://business.vanderbilt.edu/new...positive-impact-on-stock-price-stabilization/

Timewise 60+ · Oct 11, 2022

mathjak107 said:
Stock buybacks were the best thing they could do coffee it was a choice of that or a dividend

paying it as a dividend gave shareholders no extra money that they did not have the night before the ex div . It drives a stock price down by an equal amount before it can trade

on the other hand a stock buy back increases share prices most of the time as less shares are available to the public

Most of what you print here is wrong! Stock values are not directly tied to cash or the number of outstanding shares. Dividends may or may not impact a stocks market value. A stock value will increase or decrease solely on demand or lack of, for that stock. Etc. etc....

mathjak107 · Oct 11, 2022

Timewise 60+ said:
Most of what you print here is wrong! Stock values are not directly tied to cash or the number of outstanding shares. Dividends may or may not impact a stocks market value. A stock value will increase or decrease solely on demand or lack of, for that stock. Etc. etc....

No , it’s you that is wrong .

dividends directly effect a stocks price ..when a stock goes ex div exchange computers automatically reduce your starting balance being compounded on by markets by the same amount paid out .

see my example if you don’t understand why it directly effects your future compounding .

As an example if you have a 100 dollars invested and the stock pays 10% , when the stock goes ex div you get 10 bucks in hand and the mandatory price roll back leaves you with 90 dollars invested .

If the stock market doubled that stock you have 180 in the investment and 10 bucks in hand , so you have 190 .

If you reinvested the 10 bucks you have the same 100 back you had before it went. Ex div and if it doubles that is 200 dollars in value .

That is the same balance you would have had if the stock never went ex div and you never had reinvested the pay out

It’s a wash .

You are no different than pulling 10% out of a portfolio of non div payers and deciding you don’t need the money so you put it back.

so YES , DIVIDENDS EFFECT THE DOLLARS LEFT COMPOUNDING BY THE MARKETS.

there is alway a reduction in what you have left for markets to compound on before the stock can trade By reducing the share price ..

like i said , if the next day the market doubled your investment it is on less dollars invested then you had ..if you reinvested the div then you have the same dollars working for you that you had before the stock went ex dive .

just think of a stock fund dividend .

you go to sleep with 100k invested and the stock pays out a dividend ,you have the dividend in cash and your invested dollars are worth just that much less AS EACH SHARE PRICE IS REDUCED BY THE SAME AMOUNT

if you reinvested then you have the same amount you had when you went to bed.

you just have more shares at a lower price equalling the same 100k ….if the markets doubled you have the same 200k if you reinvested as you would have if the fund never paid out.

to say the paying of a dividend does not effect share price is just another case of you believing the same misinformation

mathjak107 · Oct 11, 2022

Here is the requirement that the share price and hence your dollars being acted on by the markets must be reduced before the stock or fund can trade.

and market action cannot make up for the reduction each time in the sense that you are withdrawing money out when you get the dividend just like taking money out of a portfolio.

your invested dollars will always be less then had you not withdrawn anything …

like my example shows , if you had 100 invested and it doubled you have 200

if you had 100 invested and it paid a 10% dividend you have 90 invested and 10 bucks in hand , if it doubled you have 180 in the investment and 10 bucks in hand for a total of 190 not 200

so you can either learn something , or just go on believing your own bull sh%t that the share price is not effected by dividend payouts

5330. Adjustment of Orders

The Rule Notices
(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01),

oldmontana · Oct 11, 2022

mathjak107 said:
Stock buybacks were the best thing they could do coffee it was a choice of that or a dividend

paying it as a dividend gave shareholders no extra money that they did not have the night before the ex div . It drives a stock price down by an equal amount before it can trade

on the other hand a stock buy back increases share prices most of the time as less shares are available to the public

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"Stock buybacks were the best thing they could do coffee it was a choice of that or a dividend"

Your opinion is just that.

Again..

How Will the Buyback Affect Your Company’s Value?

Contrary to the common wisdom, buybacks don’t create value by increasing earnings per share. The company has, after all, spent cash to purchase those shares, and investors will adjust their valuations to reflect the reductions in both cash and shares, thereby canceling out any earnings-per-share effect. If increasing earnings per share were the only rationale for buybacks, they would have no impact on value—which, as we’ve seen, is certainly not the case.

No impact on value. Got that?

mathjak107 · Oct 11, 2022

oldmontana said:
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"Stock buybacks were the best thing they could do coffee it was a choice of that or a dividend"

Your opinion is just that.

Again..

How Will the Buyback Affect Your Company’s Value?
Contrary to the common wisdom, buybacks don’t create value by increasing earnings per share. The company has, after all, spent cash to purchase those shares, and investors will adjust their valuations to reflect the reductions in both cash and shares, thereby canceling out any earnings-per-share effect. If increasing earnings per share were the only rationale for buybacks, they would have no impact on value—which, as we’ve seen, is certainly not the case.

No impact on value. Got that?

Read the study I posted instead of posting the same generic article with no actual facts to back up what they say over and over …they found that to be not the case and there is an effect from buy backs.

THAT IS NOT MY OPINION …IT is a study based on studying 10,000 stocks over 17 years and it is their conclusion not mine.

GOT THAT ?

oldmontana · Oct 11, 2022

mathjak107 said:
Read the study I posted instead of posting the same generic article with no actual facts to back up what they say over and over …they found that to be not the case and there is an effect from buy backs.

THAT IS NOT MY OPINION …IT is a study based on studying 10,000 stocks over 17 years and it is their conclusion not mine.

It might not be your opinion but you posted this which is your opinion...

"Stock buybacks were the best thing they could do coffee it was a choice of that or a dividend"

That is not always the case. I poved that in my link.

This thread is ..