Stock is up pretty good after hours and they announced their first dividend of .20 cents a share.
Stock is up pretty good after hours and they announced their first dividend of .20 cents a share.
Nice. It used to mean that when a tech company starts paying a dividend, they're done growing. I guess we'll see
Thanos was the hero
Not judging your intelligence but asking the question because of my ignorance.....but how can a tech company stop growing but yet stay relevant and profitable?Originally Posted by boneil
Given the current environment Google probably knows that acquisitions are off the table and they must feel like a small dividend together with buy backs are the best way to return capital to shareholders. I like it if they have no better use for it.
It just lost $6.55 a share 3 days ago, so why is .20 a big deal? What am I missing?
Exactly. Is a dividend the best use of money? If it is, then not sure what that says about future growth. Maybe they have reached a point of diminishing return on cash being used for growth. It raises some questions.
Thanos was the hero
Yeah but it jumped close to 17% last night after the earnings announcement to its all time high. That is .20 cents a share so about $40.00 if you own 200 shares. Most people are not excited about the initial dividend but are more excited about the potential dividend growth.
I think sometimes some companies establish a dividend because it can open up the stock to being included in more ETFs. NVDA, AVGO, MSFT and many other companies that are growing pay a dividend and these are often top holdings in many dividend growth ETFs.
in theory, a company giving dividends implies that they don't have a better alternative to give you a bigger return;;; meaning they don't have growth ideas they have confidence in. Does not mean they won't grow because inflation helps everyone glow. It is kinda a sign they have flamed out.
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But some companies generate huge amounts of cash flow and likely do not need to retain so much for future investment and if they do not need all of that then it is best to return it to shareholders. Investing cash into something just for the sake of investing it or making an acquisition that is not profitable is a bad alternative. Many companies in the tech space are still reinvesting in their businesses and growing but have way more cash than they need especially when you get into companies of this scale.
Which is why I started with in theory
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I get that but why doesn't buying back shares stoke the same theory? I mean dividends and buybacks are basically a company saying they don't have a better use for their excess cash.
In the 1920's/30's a classic financial book was written by a guy last name dobs, dobbins, something like that. His work states the value of a stock is 20 years of dividends brought back to time 0. This was taught as theory on MBA school for decades. Clearly this does not work at all in the modern world where many companies don't pay dividends.
My point is this- what a stock is trading at has more to do with investor supply and demand then mechanics of dividends or buy backs. it is more the ability to predict different growth rates vs what the market has already priced in which gets into speculation as much as anything as no one can say what will happen for sure in 10 years to a given company.
Many years ago I figured out I could meet my goals with Market returns so I don't take the risks associated with chasing specific stocks. Now I find it interesting that a few massive companies are moving the entire S&P500 index and kind of eroding the diversity these indexes provided
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I guess my mind works the wrong way on investments. Take AT&T for example with a 9% dividend, but the stocks value just keeps on dropping. Kinder Morgan was the same way (actually KMLP), I followed that one into the tank. I don’t do this anymore, I have a CFP to help.
I just wonder if declaring a dividend does increase a demand for a stock over time since it can now be included in many of the dividend mutual funds and ETFs. It will take a few years most likely because most of the rules and screens for many of those ETFs require a certain number of years for dividend payments. When I look at the holdings of many dividend ETFs they tend to have pretty sizable weightings in stocks like Apple, Microsoft and AVGO.
When a stocks dividend gets that high it is usually a function of the price dropping and if the price is dropping then the company may not be doing well.
I bought the shares in 2011 and have just invested the dividends back into new shares. A year ago I went with a new advisor and now the dividends go into a money market account. This is a ROTH account that I’ve never withdrawn from. I probably should have this account all in growth stocks?
The answer to that depends on your situation. If yo are in or near retirement then pure growth or all equities may be risky especially if you think you may need to use the funds in the near future.
I'm 81 and have been retired since 2005. It is for the nursing home, or our kids. I hope the nursing home has a bass boat! LOL
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