Can someone explain to me the purpose of a dividend?

Quote from BlueHorseshoe:

That is the most frightening question I have ever encountered. Finish school dude ... OMG. Or at least start ...

First and foremost, shareholders are part-owners of a business. Owners are entitled to profits generated. Profits should only be retained, i.e. not paid out, if the business can earn an excess return on reinvested profits. Some 60% of acquisitions destroy value. Leave enough cash in the hands of a CEO and sooner or later he will find something unprofitable to do with it. It is after all in his self-interest to grow the company, even if that growth is less profitable than, say, government debt.

To the point, your comment " if the stock price is adjusted by exactly the amount you are paid" is wrong." The price adjust exactly BECAUSE YOU WERE PAID. If the company instead retained that cash, the stock price would sell at a discount to that cash. Because CEOs can do no good with cash.

Close your account and get a f*cking education dude. Start with Ben Graham's Intelligent Investor, Chapter 1: Investment vs. Speculation and Chapter 19: Shareholders and Managements: Dividend Policy.

Dumb questions are fine. That was frightening ...
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Hahah blue you actualy made me laugh with the insulting reply:)

What a miserable faggot lol!


Unfortunately closing my account is not an option. Embarassingly enough, I have been prop trading for over 10 years and thats the only thing i know how to do. I dont even know how to flip burgers, I dont have a dirvers licence (well hell, I live in the city so whats the need), and I barely graduated from high school.

I did put alot of time and effort into understanding stock movement how ever.

Now the next part of my post goes to the other more civilized posters on elitetrader.com.

Lets say a stock never changes in price for 10 years and there are no trades in it. It has a perfect flat line for the stock price not counting the dividend.

It does have a dividend. From what I understand the stock price would decline with respect to the dividend, that is, if the dividend is 30 cents per quarter the stock price in this theoreticaly otherwise flat price would decline by 30 cents a quarter?

I appreciate any answers that may come :) Including the abnoxiously entertaining ones made by the fag I am replying to atm.
 
Quote from timbo:

We're talking equity. Evidently it's above your head.
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You're just embarrassing yourself pal.

But like my grandfather said: "Don't wrestle with a pig. You'll both get dirty ... but the pig will enjoy it."
 
Quote from FCCT:

Back in the day the dividend yield was a major reason why you bought shares. Most stock prices were discounted future dividends, now more or less they are discount future cash flows or something similar.
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Yep.

Dividends are important to investors, among other reasons cited above, because they may be able to find a better use for the money than the CEO.

And after all, the money IS theirs.
 
Quote from Nofear777:

Hahah blue you actualy made me laugh with the insulting reply:)

What a miserable faggot lol!

I dont even know how to flip burgers ... and I barely graduated from high school.
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No problem dude. I'll put you on my ignore list, and let bygones be bygones. Best to you.
 
Quote from BlueHorseshoe:

You're just embarrassing yourself pal.

But like my grandfather said: "Don't wrestle with a pig. You'll both get dirty ... but the pig will enjoy it."
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You know what my grandpa told me? He told me the more someone goes out of their way to make themselves look smart and others look stupid, the more you can gauge their incompetence and low self esteem.

But go on, I may learn something from you yet.
 
NoFear,

One more quick thought. Suppose someone has a $500,000 account of say 20 different blue chip stocks. They want to hold for long term gains, however, they wouldn't mind some income from it to use for other purposes.

Getting a dividend from some of the stocks monthly and others quarterly automatically puts some money into their money market account that they can do whatever they want to with. Without the dividend, to get the same "income" they would have to sell small positions on their own, either monthly or quarterly or whatever.

Now, pretend we are back in the 50s or 60s or whatever with sky-high commissions. It would cost a small forture to sell small numbers of shares each of 20 stocks. It's much better for the investor to just be paid on occasion then to have to "pay themselves" by selling tiny amounts of shares each quarter.

So, companies started paying people dividends (and maybe partly so that people wouldn't sell their stocks each quarter for income) and it soon became a way for companies to "reward" shareholders and to show how stable of companies they are, etc.

This is how I think of it at least.

From what I understand, if a stock straightlined at $10, but paid a dividend, it should then go down by that exact amount. However, I don't think one can ever discount market forces.

JJacksET4
 
Quote from TGregg:

Over a year ago, OP was making market calls:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=94993

Now he wants to know what dividends are all about.
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Dude... I am realy realy sorry if I got you smoked by that call..

I got smoked myself.. And it was certainly not the first time and it wont be the last. But is there any trader who is always right?

I was on a roll and wanted to share with the elitetrader community. Figures the goddamn market rolls over the minute I make my FIRST prediction... LOL.

But hey, I am still here. I dont make billions either. I simply want to know what the purpose of a dividend is.
 
Quote from JJacksET4:

NoFear,

One more quick thought. Suppose someone has a $500,000 account of say 20 different blue chip stocks. They want to hold for long term gains, however, they wouldn't mind some income from it to use for other purposes.

Getting a dividend from some of the stocks monthly and others quarterly automatically puts some money into their money market account that they can do whatever they want to with. Without the dividend, to get the same "income" they would have to sell small positions on their own, either monthly or quarterly or whatever.

Now, pretend we are back in the 50s or 60s or whatever with sky-high commissions. It would cost a small forture to sell small numbers of shares each of 20 stocks. It's much better for the investor to just be paid on occasion then to have to "pay themselves" by selling tiny amounts of shares each quarter.

So, companies started paying people dividends (and maybe partly so that people wouldn't sell their stocks each quarter for income) and it soon became a way for companies to "reward" shareholders and to show how stable of companies they are, etc.

This is how I think of it at least.

From what I understand, if a stock straightlined at $10, but paid a dividend, it should then go down by that exact amount. However, I don't think one can ever discount market forces.

JJacksET4
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DUDE you just gave me another idea.

WHAT IF THAT SHAREHOLDER WAS PROHIBITTED FROM SELLING?

He could still collect dividends1!!!

+11111

Keep them coming!

GREAT POINT ABOUT DIVIDENDS!

THHHANK YOUUU!
 
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