Stock question:

[Kenazo]

I was looking at a share, MCZ. (MadCatz). I've made some pretty good money on them already just by speculation, but really why is there any value in the share? Madcatz has stated that they will never pay dividends on these shares, so you can't actually get any money for your investment besides that from change in value of the share (which seems very artificial). What's the point? I'm at a loss as to why shares in general have any value if you can't really get anything for it.

I'm an accountant so I'm quite familiar with the concept of stocks, shares etc as they relate to small businesses, but for a larger business that isn't paying dividends on their shares, or management salaries to share holders, what's the point?

 

[EagleKeeper]

Company that does not pay dividends is usually indicating:
1) They are in trouble or
2) They invest the cash back into the company to grow it. Therefore making the value of the company more.

It all depends on how one perceives the value of the company and the growth prospects.

 

[Kenazo]

But if you can't ever get a piece of the money, what's the point? Basically why would someone buy a piece of a company when they're guaranteed that they'll never really get anything out of it? Consider even stocks that pay only a 2-3% dividend, what is the point? Unless you were actually going to buy a controlling share of the company I don't see the point.

 

[Toasthead]

because they reinvest the profits to make the sotck worth more..you make your money when you SELL the stock

 

[Alex]

Originally posted by: Toasthead
because they reinvest the profits to make the sotck worth more..you make your money when you SELL the stock

 

[astroview]

If you're an accountant I'd figure you'd know the answer to this question.

BRK pays no dividend, it probably will eventually. Most stocks will, even those that say they won't, well management changes its mind a lot. Once its no longer a growth stock, it'll pay one out then...

Also, even w/o a dividend, if people will value the stock highly, well then you can always sell it for more than you bought it, you profit in that way.

 

[Kenazo]

Originally posted by: astroview

Also, even w/o a dividend, if people will value the stock highly, well then you can always sell it for more than you bought it, you profit in that way.

That's what I mean, it's what ppl perceive. It's more of an artificial value. Sure you own a chunk of company, but you get nothing from it besides being able to sell it to someone else who also will have no cash flow from that stock, hence why I'm curious.

The Brk example stated above is another one that makes me wonder what's going on. Ppl get absolutely nothing out of there share yet the value is astronomically high. Chances are no one will ever see a dime from it unless the issuing company buys back shares or another company buys your shares, attempting to own a large enough chunk of the issuing company to influence it, so I suppose that could be where the value comes from.

Keep in mind I'm trying to look at it from the point of a small investor.

 

[mchammer187]

Originally posted by: franguinho

Originally posted by: Toasthead
because they reinvest the profits to make the sotck worth more..you make your money when you SELL the stock

QFT

you know when the company pays dividends the value of the stock drops right?

like if a company is paying dvidends of $1/ share the stock drops by that amount to pay this

 

[astroview]

Originally posted by: Kenazo

Originally posted by: astroview

Also, even w/o a dividend, if people will value the stock highly, well then you can always sell it for more than you bought it, you profit in that way.

That's what I mean, it's what ppl perceive. It's more of an artificial value. Sure you own a chunk of company, but you get nothing from it besides being able to sell it to someone else who also will have no cash flow from that stock, hence why I'm curious.

The Brk example stated above is another one that makes me wonder what's going on. Ppl get absolutely nothing out of there share yet the value is astronomically high. Chances are no one will ever see a dime from it unless the issuing company buys back shares or another company buys your shares, attempting to own a large enough chunk of the issuing company to influence it, so I suppose that could be where the value comes from.

Keep in mind I'm trying to look at it from the point of a small investor.

There is an investing theory that a company's value should be determined by dividends solely. In other words you own shares because you want to own a company, and to benefit from its profits. Makes sense to me. So much that I invest in several companies that pay out nice dividends. So I dont want you to think I'm belittling you, since you seem to like that investing strategy.

But it also makes sense for a company not to pay dividends so that it can invest its profits in itself to grow. And when it's all grown up it'll pay you dividends then. I think every company will pay a dividend eventually, assuming it makes it through the cutthroat business environment. People own the stock either thinking someone will pay more for it later or the dividends will make it worthwhile. When a company says it'll never pay a dividend I don't believe it, never means probably not for the forseeable future...

As for what is the value of a company. Why are you paid X amount of dollars? Why is your car worth X amount of dollars. Why does a cheeseburger at McDonalds cost a buck? Well because they are. Maybe it is artificial value, because thats what we decide it's worth as society. It seems like you're asking metaphysical questions to me.... FMV is a collective result, rooted in psychology as much as economics. I accept that.

As for BRK, I think its a pretty good value right now. Only 18x trailing P/E. Price shouldn't be indicative of value.

 

[torpid]

It's kind of like owning a square foot of land, too, because if someone eventually wants to take over your land and the surrounding areas, they have to pay you for your square foot. Or build around it.

That is officially the worst analogy I ever have or will come up with.

 

[Nitemare]

Originally posted by: torpid
It's kind of like owning a square foot of land, too, because if someone eventually wants to take over your land and the surrounding areas, they have to pay you for your square foot. Or build around it.

That is officially the worst analogy I ever have or will come up with.

land doesn't split though...well aside from California of course...

 

[torpid]

Originally posted by: Nitemare

Originally posted by: torpid
It's kind of like owning a square foot of land, too, because if someone eventually wants to take over your land and the surrounding areas, they have to pay you for your square foot. Or build around it.

That is officially the worst analogy I ever have or will come up with.

land doesn't split though...well aside from California of course...

Otherwise the analogy is perfect.

 

[dullard]

Why buy almost anything in the world? If it doesn't pay a dividend, don't buy it. Old coins don't pay dividends. Rare stamps don't pay dividends. Antique furniture doesn't pay dividends. Rookie sports cards don't pay dividends. Thus they are all worthless :roll:.

 

[GasX]

Each share is part ownership. If said shares had no value because they don't pay dividends, then someone would buy the company on the cheap and once they had 51%, they would start paying huge dividends....

 

[zendari]

Originally posted by: dullard
Why buy almost anything in the world? If it doesn't pay a dividend, don't buy it. Old coins don't pay dividends. Rare stamps don't pay dividends. Antique furniture doesn't pay dividends. Rookie sports cards don't pay dividends. Thus they are all worthless :roll:.

wtf are you retarded? People collect these things for novelty, who collects stocks for novelty?

 

[FoBoT]

growth

you are betting on the company growing its stock value by growing the company

a share has some base value if you look at the total net value of its assets (not that you can get that value from anywhere necessarily, you still have to sell the share either to another entity or back to the company)

 

[astroview]

You just have to consider the book value of a company, and if its not paying a dividend, it might be growing so much that eventually its shares will be worthless than the book value....

 

[OffTopic1]

Because of speculation.

Most companies magically worth more than their holding the minute they goes IPO (see: dot bomb). It comes down to how people perceive a company, and how much of a pyramid scheme people willing to play.

 

[Epic Fail]

Originally posted by: zendari

Originally posted by: dullard
Why buy almost anything in the world? If it doesn't pay a dividend, don't buy it. Old coins don't pay dividends. Rare stamps don't pay dividends. Antique furniture doesn't pay dividends. Rookie sports cards don't pay dividends. Thus they are all worthless :roll:.

wtf are you retarded? People collect these things for novelty, who collects stocks for novelty?

How is that retartded?? Some people use these things as investment.