Actually, in the case of companies that aren't dependent upon debt for their continued existence, with plenty of cash to meet their immediate and medium-term needs, there IS a limit to how far they can sustainably fall -- the salvage value of their assets sold at auction plus their cash reserves. Values below that point aren't sustainable for more than a few days, because if they stay down there TOO long, someone will come in, buy a controlling interest, and initiate the liquidation themselves. Companies that find themselves in that position will either defensively start to buy back their stock, declare a dividend, or their biggest shareholders (who might have been the ones who started, and maybe still run, the company) will start buying it up themselves.
Likewise, you'll never see a company with positive cash flow and profitability drop below the amount they pay out in dividends over the span of a few years unless there's substantial doubt about their ability to keep paying them. In the case of a utility with captive customers, low/no debt, the ability to make money hand over fist in good times AND bad time, and little doubt about their ability to keep paying their dividends, I really doubt you would EVER see its stock value fall below 4x its annual dividends unless the economy were SO completely destroyed (as in, nuclear destruction of America's 10 largest cities, including NY, LA, DC, Chicago, Atlanta, and a half dozen others), nobody even CARED what the stock's price was.
If the shares of a company like, say, WMZ fall below $10, I'll definitely buy more. If they fall below $8, I'll buy a LOT more, because they pay such high dividends, while making money by the truckload, that its future share price is almost irrelevant to its value as a long-term investment. Buy it for $8, and after 4 or 5 years, the dividends ALONE will have paid back the entire purchase price.
Likewise, you'll never see a company with positive cash flow and profitability drop below the amount they pay out in dividends over the span of a few years unless there's substantial doubt about their ability to keep paying them. In the case of a utility with captive customers, low/no debt, the ability to make money hand over fist in good times AND bad time, and little doubt about their ability to keep paying their dividends, I really doubt you would EVER see its stock value fall below 4x its annual dividends unless the economy were SO completely destroyed (as in, nuclear destruction of America's 10 largest cities, including NY, LA, DC, Chicago, Atlanta, and a half dozen others), nobody even CARED what the stock's price was.
If the shares of a company like, say, WMZ fall below $10, I'll definitely buy more. If they fall below $8, I'll buy a LOT more, because they pay such high dividends, while making money by the truckload, that its future share price is almost irrelevant to its value as a long-term investment. Buy it for $8, and after 4 or 5 years, the dividends ALONE will have paid back the entire purchase price.
