Nofear777,
You mentioned that a stock price is lowered by the amount the dividend is paid. I think that's what the last poster was referring to.
It is usually expected a stock will fall by the dividend amount, but of course market forces can make a stock go up or down much more then the dividend amount sometimes.
For example, a stock that is at $50 and pays a $1 dividend doesn't go to exactly $49 the next day necessarily. If they also reported good numbers or were upgraded or whatever, it could open at $52 the next day, or if the market was bad or they were downgraded or whatever, they could open at $48. In either event however, the stock holder was paid their $1 per share.
I agree with the comment about the market setting the prices. No fundmentals, forcasts, etc. set stock market prices - it is just buying and selling.
As far as why companies pay out dividends, it seems like some companies do it just to show they are stable and to reward buy and holders each month or quarter with the dividend even if the stock price doesn't go up.
Here is some info I found in the following link:
http://www.investopedia.com/articles/03/011703.asp?viewed=1
Arguments For Dividends:
"In opposition to these two arguments is the idea that a high dividend payout is important for investors because dividends provide certainty about the company's financial well-being; dividends are also attractive for investors looking to secure current income. In addition, there are many examples of how the decrease and increase of a dividend distribution can affect the price of a security. Companies that have a long-standing history of stable dividend payouts would be negatively affected by lowering or omitting dividend distributions; these companies would be positively affected by increasing dividend payouts or making additional payouts of the same dividends. Furthermore, companies without a dividend history are generally viewed favorably when they declare new dividends. "
JJacksET4
You mentioned that a stock price is lowered by the amount the dividend is paid. I think that's what the last poster was referring to.
It is usually expected a stock will fall by the dividend amount, but of course market forces can make a stock go up or down much more then the dividend amount sometimes.
For example, a stock that is at $50 and pays a $1 dividend doesn't go to exactly $49 the next day necessarily. If they also reported good numbers or were upgraded or whatever, it could open at $52 the next day, or if the market was bad or they were downgraded or whatever, they could open at $48. In either event however, the stock holder was paid their $1 per share.
I agree with the comment about the market setting the prices. No fundmentals, forcasts, etc. set stock market prices - it is just buying and selling.
As far as why companies pay out dividends, it seems like some companies do it just to show they are stable and to reward buy and holders each month or quarter with the dividend even if the stock price doesn't go up.
Here is some info I found in the following link:
http://www.investopedia.com/articles/03/011703.asp?viewed=1
Arguments For Dividends:
"In opposition to these two arguments is the idea that a high dividend payout is important for investors because dividends provide certainty about the company's financial well-being; dividends are also attractive for investors looking to secure current income. In addition, there are many examples of how the decrease and increase of a dividend distribution can affect the price of a security. Companies that have a long-standing history of stable dividend payouts would be negatively affected by lowering or omitting dividend distributions; these companies would be positively affected by increasing dividend payouts or making additional payouts of the same dividends. Furthermore, companies without a dividend history are generally viewed favorably when they declare new dividends. "
JJacksET4