17 votes

Why do people buy high dividend stock?

Startups and heavily growing companies usually invest their earnings themselves, rather than paying dividends. Established companies in stable markets don't have as much opportunity to invest the ...
jpa's user avatar
  • 430
12 votes

Why do people buy high dividend stock?

Even if the total discounted return on a no-dividend stock and a stock paying dividends is the same, and we assume the tax system is completely neutral in this regard, the dividend-paying stock will ...
1muflon1's user avatar
  • 55.5k
12 votes

Why do people buy high dividend stock?

The original purpose of stocks is to pay dividends. If no stock, ever, paid any dividends, you'd be left with a tulip bubble - the price of a good inflating for no other reason than the expectation of ...
Therac's user avatar
  • 223
5 votes

Why do people buy high dividend stock?

Paper profits and asset values can turn out to be just that, and not actually exist in the real world. There’s always a risk that a high-growth company will suddenly collapse. Paying annual dividends ...
Mike Scott's user avatar
4 votes

Why do people buy high dividend stock?

There have been many research papers on why some individual investors prefer dividends {1,2}. E.g., see Table 2 of {1}, which surveyed 555 individual investors over ~20 questions. Excerpt: References:...
Franck Dernoncourt's user avatar
2 votes

Why do people buy high dividend stock?

Retirees use the dividend as income. High income earners use "franked" dividends to reduce tax. Many people are not employed and have no income, yet have money. If they pick the right ...
John Mee's user avatar
  • 121
2 votes

Why do people buy high dividend stock?

Because it feels good. As simple as that really, a dollar in the hand is better than an ambiguous share in a company. Also if you get paid the money instead of it being reinvested into the same ...
Aequitas's user avatar
  • 151
2 votes

Why do people buy high dividend stock?

An old-fashioned principle for remaining wealthy is: Don't spend down your capital. In the context of stocks, this is often interpreted as, "It is okay to spend your dividends, but always ...
Jasper's user avatar
  • 230
2 votes

Why do people buy high dividend stock?

Even though the price of the stock drops by the amount of the dividend when the dividend cut-off date has lapsed, this does not mean the dividend is just an illusion. As a simplification you can ...
tln's user avatar
  • 121
2 votes

Why do people buy high dividend stock?

Ultimately, the value of a stock is the time-adjusted value of all future payments the owners would receive as a reward for owning it. If at the end of a year, a company has paid a certain dividend ...
supercat's user avatar
  • 285
2 votes

interest rate risk vs duration risk?

Interest rate risk is way broader. you can have basis risk, repricing risk, prepayment risk with equity and FX options you have rho and phi and might face early exercise Banks need to compute several ...
AKdemy's user avatar
  • 4,092
1 vote

Do banks pay interest on the money they create?

Firstly, banks do pay interest on deposits. The rest is quite complicated in reality. Your reasoning is based on the idea of a simple textbook example of fractional reserve banking: ...
AKdemy's user avatar
  • 4,092
1 vote

Taking a loan to pay another loan with the same interest

If you pay back the outstanding debt on the first loan with a new loan (and there is no penalty for doing so), you do not pay interest or anything else for the first loan anymore. You paid your debt. ...
AKdemy's user avatar
  • 4,092
1 vote

Central bank use of interest to combat inflation

Rising interest rate will reduce even cost push inflation (this does not mean it is desirable to increase interest rate when there is cost push inflation from welfare perspective). For example, ...
1muflon1's user avatar
  • 55.5k
1 vote

How to reconcile 1) the International Fisher Effect and 2) rising interest rates leading to currency appreciation?

It's the expected exchange rate (not current) which is identical to interest rate parity. See for example this answer or this one. While the current spot increases for the higher rates country, the ...
Alex's user avatar
  • 344

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