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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
  • 56.8k
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?

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

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

How do bonds & shares relate to the money supply?

I think there is some confusion here. I'll try and explain what's going on as I see it. Firstly, when you state that banks take deposits and lend them out you are referring to the Intermediation of ...
Jamie Smith's user avatar
2 votes
Accepted

Why do accumulating ETFs grow linearly instead of exponentially?

You do not need dividend reinvestment to have exponential growth. Anything that grows at a certain rate (say 5% each year) over time will grow exponentially. However, what you look at is an index the ...
AKdemy's user avatar
  • 4,122
1 vote

Does the discounted dividend model assume a stock underperforms the risk-free rate?

Does the discounted dividend model assume a stock underperforms the risk-free rate? No, note $r$ is not risk free rate. In Gordon growth model (i.e. the model your equation describes) $r$ is the ...
1muflon1's user avatar
  • 56.8k
1 vote

General mechanism of bond price and real interest rate movements

1 ) Economic growth benefits firms, and all else equal, that would have a downward effect on bond yields, hence prices would increase. However, inflation and increases in target interest rates (FED ...
AKdemy's user avatar
  • 4,122
1 vote

How do bonds & shares relate to the money supply?

The explanation is not entirely correct. The reason why you lending money through 5 year bond does not increase money supply is that 5 year bond is not included (using UK definition - money supply ...
1muflon1's user avatar
  • 56.8k
1 vote

How do companies raise funds by selling stocks

An IPO roughly works like this: Company has 1000 shares held by the current owner of the firm. The investors sell 100 shares for \$0.94 each to an investment bank for a total of $94. The investors ...
BKay's user avatar
  • 16.3k
1 vote

Why people bought stocks in open outcry?

There might be a misconception here. Open outcry is a system where physical human beings trade with each other on behalf of their clients. This system was developed hundreds of years ago prior to ...
dm63's user avatar
  • 1,288
1 vote

Why is the stock market always rising?

Everything is relative. Specifically, relative to your unit of account. If we're talking dollars, the total stock of dollars (the usual metric is M2) increases basically every year. This leads to ...
B T's user avatar
  • 587

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