Can someone explain to me the purpose of a dividend?

N

Nofear777

Ok I am a complete noob I guess. But for the life of me I cant figure out what the purpose of a dividend is if the stock price is adjusted by exactly the amount you are paid.


EDIT: One thing I just thought up of. Dividends dont depend on liquidity...

Thats a big plus.
 
Quote from Nofear777:

Ok I am a complete noob I guess. But for the life of me I cant figure out what the purpose of a dividend is if the stock price is adjusted by exactly the amount you are paid.
More...

1. To convert potential capital gain to ordinary income... taxed at a higher rate.

2. Allows the Gummint to tax the same $1 of earnings, TWICE.
 
Quote from gnome:

1. To convert potential capital gain to ordinary income... taxed at a higher rate.

2. Allows the Gummint to tax the same $1 of earnings, TWICE.
More...

You lost me. Can you explain this in lamans terms please.

Thanks for the reply.

EDIT i understand the first part... i think.

Second part is, why would I want to be taxed 2x?
 
Quote from Nofear777:

Ok I am a complete noob I guess. But for the life of me I cant figure out what the purpose of a dividend is if the stock price is adjusted by exactly the amount you are paid.
More...
A stock's price is determined by supply and demand.
 
BTW I pay alot of taxes, do you think it would help me to be in higher dividend yielding stocks rather than growth stocks?

Not considering stock prices.
 
"Dividends are payments made by a corporation to its shareholder members. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend."

Dividends
 
Quote from Nofear777:

BTW I pay alot of taxes, do you think it would help me to be in higher dividend yielding stocks rather than growth stocks?
More...
No - with growth stocks you get decide when to realize the gains/pay taxes (when you sell), with dividend-yielding stocks you have to pay taxes as you receive the dividends.
 
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