Google Will Eat Itself

> You are correct about the empirical facts (there exist some companies don't currently pay dividends), but theory is needed to understand that if those company's never paid dividends, they would be worthless.

But since that is absolutely false, I only need to point out the many companies that don't pay dividends and yet are widely accepted as investments. Here is a list of companies that do not pay dividends:

http://finance.yahoo.com/news/biggest-companies-dont-pay-div...

Note the presence of Google, Amazon and Yahoo on the list -- companies that you have just claimed are worthless investments.

Companies that serve a stable market and that aren't growing any more, will in most cases pay dividends in order to hold onto investors. They take corporate profits and divide them among the shareholders -- that's what "dividend" means.

Companies that are growing, like most modern technology companies, often don't pay dividends. They don't because they need the corporate profits to grow the company.

Many modern high-tech companies do not pay dividends. The stockholders fully understand the reason why (the company is still growing), and those stocks are very attractive to investors because they are growing along with their companies.

> Therefore the value of a share is the expected value of all future dividends.

No, it is the expected value of future growth, regardless of the source (growth and dividends). For God's sake, stop arguing about something about which you know precisely nothing.

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http://trendshare.org/how-to-invest/why-do-some-companies-no...

Quote: "a company that plans to grow much larger might reinvest its profits back into the company so that it's worth more in the near future. You often see this in technology stocks, where acquiring more customers or increasing the value of each customer will hopefully produce even more revenue in the future—and more profits.

A company might also acquire other companies. This is similar to investing in the company. You can see this happen in very large companies, where it's cheaper and easier to buy an established but smaller company than it is to start a new line of business.

Finally, a company might buy back shares of its stock and retire them, so that every remaining share owns a larger piece of the company and thus becomes more valuable. This strategy makes a lot of sense when the price of the company's stock is artificially low.

In one sense, these strategies have one thing in common: they're all intended to make the company itself intrinsically more valuable, whether by expanding the customer base and product offering, by providing opportunities to enter new markets or capture more of an existing market, or by increasing demand and thus raising the price of the stock itself.

A company which can do this is worth more than gold; a company with a solid business that grows and generates more cash every year is a great company to own. Instead of financing its growth (or operations) through debt, it's free to build up its own equity."

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> Your smugness is unwarranted and reflects badly on your character. I suggest you read some books on economics and try to be a better person.

You need to go out and acquire an education. You cannot locate a defense for your beliefs, you have no idea to whom you are speaking, how I made my fortune, and you are certainly not in a position to lecture anyone about equities.

You didn't refute his point at all.. He said > You are correct about the empirical facts (there exist some companies don't currently pay dividends), but theory is needed to understand that if those company's never paid dividends, they would be worthless.

Which means that EVENTUALLY, these companies will either pay dividends or their stocks are worthless. You pointed out companies that currently do not pay out dividends, but it in no way refutes his statement.

And I have to say he's right. Why? Because if companies never pay out dividends, you're buying stock where the sole method of making profit is by selling it for a higher price. Yes, it's how the market works, but if stocks inherently do nothing (no dividends/dividend-likes, no voting), then they are inherently worthless.

Simply because a market exists where people buy low and sell high does not mean that stocks can exist without inherent value. It may be true for now, but the person you were responding to said (keyword here) eventually. Otherwise, rocks have just as much value as stock.

EDIT: Two things. One is that I just remembered that Apple recently started paying out dividends in the last year or two. Here's an example of a company that did not pay dividends for a long time and EVENTUALLY started to.

The second thing is that I usually hate downvoting people, but you were incredibly aggressive rather than calmly attempting to understand (or be understood by the person) you were conversing with.

> Your logical error is in assuming that if a company that pays no dividends now is considered a good investment, then that must mean that investors don't care if that company never pays dividends.

That is not a logical error, it is an uncontroversial fact. In point of fact, investors DO NOT CARE whether a company pays dividends, as long as their capital grows. Do you really think people who invest in Berkshire Hathaway are stupid or misguided? And will you people PLEASE do some reading and stop arguing from a position of ignorance?

> ... investors don't care if Google pays dividends now ...

That's right, and investors also don't care whether Berkshire Hathaway never pays dividends, because it's a very attractive investment, and it has never paid a dividend. If Google's growth curve should flatten, they'll have to pay a dividend. But your claim was that a stock that didn't pay dividends was worthless. It's embarrassingly false.

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Link: http://seekingalpha.com/article/1939371-no-dividend-stocks-c...

Quote: "Having delivered an average of one-third of stock returns since, (it was more than 50% in the '70s and 14% for the '90s) the case for dividends is clear. But there is no free lunch here. In periods of economic and market growth, dividend payers typically trail the performance of non-payers. Like now. According to S&P Dow Jones Indices, for the 12 months through November dividend payers in the S&P 500 delivered a 39.6% total return. No need to apologize for that. But the non-dividend payers clocked in with a 46.4% total return.

Ranking the entire S&P 500 by 12-month price gains, seven of the top 10 are dividend holdouts, led by Netflix (NFLX) which has quadrupled in price this year. The others: Micron Technology (MU), E*TRADE (ETFC). Genworth Financial (GNW), Yahoo! Inc. (YHOO), Celgene (CELG) and Boston Scientific (BSX), all of which have at least doubled in price over the past 12 months."

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Which part of this is in any way confusing?

> I'm done with this,

I'll say you are. But your ignorance remains in full bloom.

> but next time try reading what you are replying to carefully, instead of just blasting out facts.

"Don't confuse me with the facts when I'm on a rant." Sadly noted.

British 18-19th C domain versus everyone else. Only Central America and Thailand buck the trend, the former most likely because of the enormous economy to their north.

> [...] a transition from "shareholder capitalism" to "manager capitalism".

Essentially, owner operated companies work better than manager operated companies. On average. Look up `principal agent problem' for more literature.