Investing Catechism

[trendlover]

I think I see what nitro saying.
He (I think?) is saying there is so much money betting in the stock, that betting money is VERY BIG RATIO compare to the real earning of the company. So you can buy the stock with no dividend, BUT the price go up and down MOSTLY from buy and sell, NOT FROM EARNINGS. So nitro is saying WHY SHOULD I BUY IF NO DIVIDEND?

 

[nitro]

Quote from crash n burn:
wrong. companies pay or not pay dividend based on their stage of development, the industry dynamics and needs of capital.

They do? How do you explain MSFTs dividend, or GS dividend, or scores of others that while not this blantant, still get away with no dividend inspite of having a mature business? In fact, if it weren't for lobbying by massive funds, MSFT dividend would still be zero. Instead, MSFT div yield is like 1.8%. LMAO.

investors should be concerned about the projected cash flow associated to any company rather than if pays or not dividends now.

Why? What does that get me as an investor. To what end do I care what their cash flows are? Do you care what I earn? Or what about a company in TimBukTu? They earn too. Why don't you care what they earn? Do you care what martians earn?

wrong again. earnings mean a lot (probably it is most important aspect) as it improves the company cash flow.

Why. Why do I care what they earn? Do you care what the guy down the street from you earns? Does that somehow magically go into your pocket?

the shareholders are entitled to the company economic value added, whether it is being distributed through a dividend today or held to finance the company operations in the near future.

It is? Then give it to me today, Thank You Very Much.

either way, the stock price always reflect that reality.

Yep, I can see you were born yesterday and don't know what you are talking about. Tell that to ENE shareholders, or LEH, or MER, or FNM, or 90% of the stocks taht traded in the Nasdaq during the internet boom.

a company could pay dividends now and stop paying in the near future due to operational problems while the opposite is obviously very likely as well. it is all part of the company life cycle.

Then I would stop investing in them, and so would any rational investor.

so your point is trading is a losing proposition rather than whether the company dividend policies turn them into ponzi schemes or not? ok, i accept that as a valid assertion.

What? Oh gawd. Nevermind.

 

[nitro]

Quote from trendlover:

I think I see what nitro saying.
He (I think?) is saying there is so much money betting in the stock, that betting money is VERY BIG RATIO compare to the real earning of the company. So you can buy the stock with no dividend, BUT the price go up and down MOSTLY from buy and sell, NOT FROM EARNINGS. So nitro is saying WHY SHOULD I BUY IF NO DIVIDEND?

I am saying it is all smoke and mirrors if there is no dividend, FROM AN INVESTING POINT OF VIEW.

People try to rationalize their investments in a company with no dividend by quoting figures that MEANS ZERO TO THEM as shareholders. That prices go up or down on these numbers is an illusion created by nothing more than a ponzi scheme of, I buy, hope that some idiot that I have sold the idea that earnings means something in the absence of dividends, and sell to them. CACHING! Now they are left holdng a worthless piece of paper. But hey, you can feel good holding the bag because they have earnings! Whoopeee! You better hope some idiot comes by soon and takes off you hand!

OR, if I have run out of idiots to sell to, I can always wait once or twice a month to the sugar daddy that is the pension fund to drive my stock higher because they just buy and don't give a shit what they buy.

 

[trendlover]

Quote from nitro:

I am saying it is all smoke and mirrors if there is no dividend, FROM AN INVESTING POINT OF VIEW.

People try to rationalize their investments in a company with no dividend by quoting figures that MEANS ZERO TO THEM as shareholders. That prices go up or down on these numbers is an illusion created by nothing more than a ponzi scheme of, I buy, hope that some idiot that I have sold the idea that earnings means something in the absence of dividends, and sell to them. CACHING! Now they are left holdng a worthless piece of paper. But hey, you can feel good holding the bag because they have earnings! Whoopeee! You better hope some idiot comes by soon and takes off you hand!

OR, if I have run out of idiots to sell to, I can always wait once or twice a month to the sugar daddy that is the pension fund to drive my stock higher because they just buy and don't give a shit what they buy.

Ok, better to buy convertible bond (cash or shares)?

 

[sprstpd]

Quote from nitro:

I am saying it is all smoke and mirrors if there is no dividend, FROM AN INVESTING POINT OF VIEW.

But even you admit that there is no clear definition of investing versus trading. Even you admit that investors will flip stocks based on personal heuristics. Isn't that trading? This whole distinction between trading and investing that you are making is pretty much meaningless.

That prices go up or down on these numbers is an illusion created by nothing more than a ponzi scheme of, I buy, hope that some idiot that I have sold the idea that earnings means something in the absence of dividends, and sell to them. CACHING! Now they are left holdng a worthless piece of paper. But hey, you can feel good holding the bag because they have earnings! Whoopeee! You better hope some idiot comes by soon and takes off you hand!

By this reasoning, once WAG (or a symbol of your choice) pays its dividend, then what's left of the company is just a worthless piece of paper. Because you cannot be guaranteed that that company is going to ever pay another dividend. So at that point - poof! Worthless! Better sell it!

 

[nitro]

Quote from sprstpd:

But even you admit that there is no clear definition of investing versus trading. Even you admit that investors will flip stocks based on personal heuristics. Isn't that trading? This whole distinction between trading and investing that you are making is pretty much meaningless.

No, there is definitely a difference. Time is the essence of the difference. Here is a similar example. I drive a car. Mario Andretti drives a car. The differences are huge between me driving a car on the road, and he driving a car on a racetrack, and speed (distance over time) is what differentiates it. However, I can race my car to some extent on the roads, but it will never be racing the way that Mario Andretti races. See? Trading is essentially a short term phenomena.

By this reasoning, once WAG (or a symbol of your choice) pays its dividend, then what's left of the company is just a worthless piece of paper. Because you cannot be guaranteed that that company is going to ever pay another dividend. So at that point - poof! Worthless! Better sell it!

Not at all, and it boggles the mind that you are asking this question. AS LONG AS THE DIVIDEND YIELD ON A STOCK IS MAINTAINED, REGARDLESS OF WHEN THE DIVIDEND IS PAYED, the stock is investible as long as it has a history of maintaining that dividend through earnings, and has a history of raising it when earnings increase.

Could I game it by trying to capture just the dividend by exiting the stock right after the dividend payment and getting right back in before the next ex-date? Sure, why not, but that falls under a trading strategy, not an investing one. But it might work, and traders try all the time.

 

[sprstpd]

Quote from nitro:

AS LONG AS THE DIVIDEND YIELD ON A STOCK IS MAINTAINED, REGARDLESS OF WHEN THE DIVIDEND IS PAYED, the stock is investible as long as it has a history of maintaining that dividend through earnings, and has a history of raising it when earnings increase.

So you are 100% sure that the dividend will be paid next time?

 

[sprstpd]

Quote from nitro:

No, there is definitely a difference. Time is the essence of the difference. Here is a similar example. I drive a car. Mario Andretti drives a car. The differences are huge between me driving a car on the road, and he driving a car on a racetrack, and speed (distance over time) is what differentiates it. However, I can race my car to some extent on the roads, but it will never be racing the way that Mario Andretti races. See? Trading is essentially a short term phenomena.

You can't be a trader if you hold positions for a long time? Your definition makes no sense.

 

[nitro]

Quote from sprstpd:

You can't be a trader if you hold positions for a long time? Your definition makes no sense.

Nope. "Long time" as in weeks to months or longer are "investments". Shorter than that is "Swing Trades", and then we get into pure trades that last a few days at most. It gets fuzzy when a trader sells for example a leap, but that is a somewhat exotic example. Another trade that can turn into an investment of sorts is a pair trade, but that is somewhat exotic as well. I am speaking of plain folk buying and selling shares, perhaps selling covered calls, and the turnover is relatively slow.

There is no standard definition, but that is my definition.

 

[nitro]

Quote from sprstpd:

So you are 100% sure that the dividend will be paid next time?

Nope, in fact, I remember when I first started "trading", I used to try to game C preferreds. I used to think how easy it was to make money in these things if you were patient. Just wait long enough and they would invariably go from $25 to about $18 or $19. I would start buying at $21 and add from there. Sure enough, they would be at $25 again within months. I was 100% certain these things were rock solid.

Well, we all know what happened to C and almost the entire US financial system. Nothing, outside of arbitrage, is risk free, and even arbitrage has execution risk.

But WAG or PG paying it's dividend is as certain as anything I have seen in markets on the investing time frame. As I stated several times, you want to find companies that has a history of paying the dividend, and of raising it as their earnings increase.