Many investors have concluded that stocks with big dividends will go on thrashing the competition. But the recent burst also offers reason to worry about what comes next. Financial theory provides no convincing reason why a stock that pays a big dividend should outperform one that pays a small one, or none at all. Two giants of modern economics, Franco Modigliani and Merton Miller, published a paper in the 1950s that showed that, in an idealized world, a company can’t raise its stock market value by increasing its dividend.
Common sense suggests that the same thing holds true in the real world. If you receive a dividend of $1, the intrinsic value of the underlying shares should also decline by a buck. If it didn’t—if management could conjure up payouts out of thin air without any effect on the value of the business—every company would pay triple-digit dividends. A dividend essentially takes some of the value in your shares and deposits that amount in your bank account instead. This might be a valuable feature if you don’t trust the company’s top executives to deploy your money wisely. But it also raises a deeper question: Why would you hold a stock with such feeble leadership in the first place?
Source: Globe and Mail
Related Articles:
- 12 Dividend Stocks With 50+ Years of Consecutive Increases
- 8 Dividend Stocks With A 15% Yield In 15 Years
- First Quarter 2014: Top And Bottom Performing Dividend Stocks
- Don't Touch These 5 Dividend Stocks!
- 7 Dividend Stocks Headed In The Right Direction
Are dividend stocks running out of gas?
Posted by D4L | Wednesday, December 24, 2014 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
Dividend Growth Stocks News
~
Popular Posts Last 30 Days
-
If you're worried about inflation rearing its ugly head next year, you should probably worry about more likely catastrophes, such as bei...
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
We screened our 24/7 Wall St. dividend equity research database and found 5 stocks that combined can generate over $3,000 of annual passive ...
-
The stock market has been on an upward path of late, with some of the most prominent stocks hitting astronomical highs. The dividend yield o...
-
Dividend growth stocks can be incredibly attractive investments if you crave recurring income. As these types of stocks raise their dividend...
-
In my opinion, there are three criteria investors should consider when evaluating a particular stock for their portfolio. The first is histo...
-
Dividends can be a tremendously powerful part of your investing strategy. Not only can they give you a continuing source of cash to reinvest...
-
In this article, we discuss 5 best March dividend stocks to buy. If you want to read our detailed analysis of dividend capture strategy and ...
-
As the broader stock rally broadens to some of the more “boring” corners of the market, it’s the higher-yielding dividend plays that could s...
-
Double your money in a short time. Few investors would walk away from such an opportunity. Of course, there's no guarantee that any inve...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.