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First smart thing I heard on CNBC this year
- Thread starter vladiator
- Start date
Quote from daniel_m:
question from an idiot:
if the company pays the dividend, that money is now in the hands of the investor.
if the investor uses that money to "turn around and with those dividends buy the company's shares on the market", another investor gets the proceeds of that transaction, not the company itself, right? so the company then has less cash, regardless of what the investor does with the dividend. so how is this the same thing?
what am i getting wrong?
The MM theorem states that it doesn't matter if a company makes a dividend or buys back equity. The net effect is the same (in a frictionless world).
Think about it. If a company buys back its equity. That money is out of the pockets of the company and into the pockets of an investor. Just as it would be, had it declared a dividend.
It is the same from the viewpoint of the company. It isn't from the viewpoint of the investor. Because some would sell while others may want the dividend. In any case it is only a theory. Albeit one that won its creators the Nobel prize.
Quote from WDGann:
Anyone know how the Dogs of the Dow are doing for the past few years... [/B]
I think it was Active Trader that had an article on the Dogs this month or last. It seems I remember the return was (-18%) for the past year. However, MO had a good run from 18 to 50 in 2000-2001 and I think EK ran from 25 to 35 over the past year.
(If it was not AT, it was one of the other Business Mags, I don't think any of my quilting mags ran the story.)
What these analyst dont say is they get lots of money from company that are worth crap and cant pay dividend because they are so much in debt and cant make any money.
These are the same analysts that were telling everyone Enron was a good buy 2 weeks before it went broke, and some still belive them.
And can one explain to me what growth is.
Since when is it bad to make money without getting bigger .? Just turning a profit day in day out......
These are the same analysts that were telling everyone Enron was a good buy 2 weeks before it went broke, and some still belive them.
And can one explain to me what growth is.
Since when is it bad to make money without getting bigger .? Just turning a profit day in day out......
... you make it sound as if it wasn't factored in for some reason.Quote from daniel_m:
i think that's a good point.
i was just recently looking through some of this stuff myself. from my admittedly limited understanding, the returns on that long-term-buy-hold crap just looks so pathetically weak unless you factor in dividend payments (and reinvestment).
Dividends only count b/c there are market frictions and b/c there are psychological nuances to their existence.i think this is the area where EMH really comes to the fore -- seems to me that anyone following the 'investment' advice in the popular books is fooling himself if he thinks that he's gonna start uncovering next-big-thing type growers for the next 15-20 years with his pathetic homemade fundamental anlayses. i say dividends count, and count big.
Quote from Babak:
It is the same from the viewpoint of the company. It isn't from the viewpoint of the investor. Because some would sell while others may want the dividend. In any case it is only a theory. Albeit one that won its creators the Nobel prize.
Why is it not the same from the perspective of an investor, ignoring market frictions??? I either get the dividend or have a "homemade" dividend by selling a portion of my stocks after the price gain.
Quote from vladiator:
Why is it not the same from the perspective of an investor, ignoring market frictions??? I either get the dividend or have a "homemade" dividend by selling a portion of my stocks after the price gain.
in theory you are correct but in reality what was happening was that management was using the excess cash to enrich themselves or overspending in purchasing other companys at huge market premiums. at least if the cash is paid out as dividends it cant be wasted by corrupt or inept management.