This is the reason that secondary markets exist. If owning shares generated no cashflow, if there was no possible way one could ever sell the shares, and if it was absolutely certain that this situation would continue forever, then you would be correct and the value of those shares would indeed be zero. Of course this is not remotely the case: companies may at any time begin paying a dividend, or raise it etc. and this is incorporated into the market's valuation. Likewise, if a strong-performing company were significantly and obviously undervalued by the market merely because it is not paying a dividend, then Warren Buffet could swoop in, buy the whole company, and immediately reap a massive windfall profit with essentially zero risk or effort. After a few rounds of this, Joe Public would catch on and front-run Warren (bid up the price of the stock) until all windfall-profit opportunities were eliminated. There's no Ponzi scheme here, just basic economics. It's also worthwhile to consider a portfolio consisting entirely of dividend-paying stocks. You are paid cash; the cash can either sit in your account as cash and earn <1%, or you can reinvest it back into the shares. If you do the latter then there is no practical difference whether the shares paid you a dividend or not; in either case your position in stock XYZ is worth more than it was yesterday, and you can (subject to liquidity) immediately and at any time convert this position into cash.
Yes, I'll summarize for everyone just starting this thread: nitro says: Dividend paying stocks good! Nondividend paying stocks bad!* * = except for AAPL!
Cash flow with no exchange for the labor is the capitalist. I know you understand this for a long time nitro, but I really like this explanation. http://beginnersinvest.about.com/od/wealthmanagement1/ss/capitalist-class.htm
I read the link above again and again and again. So for the capitalist they do not buy the assets that bring no money in the future. If the person is middle income and they pay all their moneys to rent, mortgage, tv,car, furniture... this is no return to them. They live and spend. But they go broke sometimes if they can not work in their future, or something take their income away. So is really like for example the potato. You can have one potato, then eat the potato becaue you are hungry. Then you can buy one more potato to eat when you have your paycheck, and you are not hungry no more. Or you can buy one potato, eat only half, then plant in the ground half the potato you do not eat y grow 5 potatoes from this half.
Since he said that a company with immense assets or earning power (or both!) but no dividend is worthless, then I'm sorry to say he is in fact stupid, at least on the subject of investing.
There are said to be about 25 companies out of the S&P 500 which have increased their dividends each and every year over the last 25-30 years. Does anyone know where to get hold of the names of these companies?
I agree, most of what Nitro posts on this site are total crap. No less then 6 really dumb theories that he's posted now, and not one of them would be acceptable in a finance course. The funny thing is, he has fans. But if you bring up a specific real world example ( like Yellow Media ), these people would rather believe in Nitro then look into these examples.
----------------------------------------------------------------------------------- Cutten, no. I think his opinion is not saying this company is worthless. Nitro is saying is not guarantee anything to him in the present and the future if he (hold) this for (investment). He is not trading in then out of this stock, he is talking about to hold as investment. The dividend is money in the present he can see and take. So if nitro take the chance to buy this stock, and he know price can go up, can go down, no buyers in the future maybe, but the dividend is real in the present, this is guarantee. I think he is saying what is can convince him to play this game.