Jim Chanos in a Bloomberg interview suggests that some of the oil majors are essentially borrowing their dividend: "...âIf you look at their cash-flow statements relative to their income statements, you will see companies that havenât replaced reserves in years, and havenât seen any increase in revenues in years,â he said. âTheyâre borrowing their dividend. Theyâre in effect liquidating...." http://globaleconomicanalysis.blogspot.com/2010/06/jim-chanos-shorts-oil-companies-based.html
http://www.portfolio.com/business-news/2009/09/23/oil-companies-invest-in-biofuels "Oil companies have long been at play in the alternative-energy field. Theyâre covering their bets, they say, preparing for a world that needs all sources of energyâincluding alternatives to oil. Virtually every major oil company has invested in biofuels, or solar, or using hydrogen as a fuel, or geothermal energy, or wind. Their critics, thoughâand there are manyâpoint out that the oil majorsâ investments in alternatives are dwarfed by their continuing spending on the quest to find more crude. They should, in short, act less like oil companies and more like energy companies." ------------------------------------------------------------------------------------- Nitro, they cover their bets now.
i read an article a couple years ago that said they ,big oil co's, decided that there wasnt enough profit left in oil,or oil,for more exploration and that they foresaw alternatives as the future,saying that the smaller companies with smaller net worth to maintain return on were doing the present exploration
"The great stock myth" In 1985, Rajnish Mehra and Edward C. Prescott, economists then at Columbia University and the University of Minnesota, published a paper pointing out a strange anomaly they dubbed âthe equity premium puzzle.â Since the late 19th century, stock investments in America had generated returns that were 6 percent higher than what economists call âthe risk-free rateâthe yield on an investment for which there is virtually no risk of losing your principal. The low-risk investments, such as short-term U.S. government debt, had yielded less than 1 percent.Those âexcessâ stock-market returns, which include both price appreciation and dividends, are much higher than you would expect if they simply reflected the risk of losing your investment (donât even get me started on the arcane procedures by which economists arrived at this conclusion). Moreover, this premium cannot simply be attributed to an underestimation of future corporate growth by investors. Even when expected dividend or corporate-earnings growth is taken into account, stock returns are higher than one would predict... http://www.theatlantic.com/magazine/archive/2010/09/the-great-stock-myth/8178/
Why are you confused ? Shareholders own the company when earnings go up that's more capital added to the company so its worth more. I'll keep it simple you seem inexperienced. You run a company worth $10,000 today. You make $1,000 net cash profit. That makes your company worth $11,000. If you issued 10,000 shares for a $1 why on earth would you sell those shares for $1 now ?
Buddy, your ideas are to put it bluntly ignorant. Do you even know what a Growth Stock is ? Your "good example" you so dearly require is IN YOUR OWN POST. MSFT is a good example of a company that had many stages of maturity. Now, it is worth a lot of money, but even MSFT has a price below which someone would take it over just to get the guaranteed cash flow every year.
Buddy, Nitro makes NO SENSE PERIOD. Are you really as thick headed as this dimwit Nitro ? I can very easily find you many basically insolvant companies that pay generous dividends, and on the flip side highly profitable companies that pay very modest dividends. The dimwit can buy the first group.
Sorry I interrupted your "Flat Earth Society" discussion. I got confused and thought this was an investment site where most contributors had some semblence of rudimentary knowledge in the field.