Simple Dividends Question

[bills217]

For clarification, I made this post after I researched ACAS, which is currently paying a ~9% dividend and doesn't appear likely to drop it, and also appears undervalued according to my methods.

Disclosure: I own play money shares of ACAS on Marketocracy but no real money shares, yet. [img]/images/graemlins/smile.gif[/img]

[spider]

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But if the stock price will just drop by the amount of the dividend, then doesn't that offset the 6.3% gain? How do we benefit? If we wanted cash, couldn't we just sell some of the stock before the dividend?

Sorry to be so obtuse but I just don't understand. [img]/images/graemlins/confused.gif[/img]

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OK, back to the original question then. It's just a question of how the market is going to value a stock and if someone values a stock at $10 pre-dividend, they're going to value it at $9 post-dividend, right?

Maybe you are confused about dividend date vs ex-dividend date. Dividends go to whoever owns a stock on the day before the ex-dividend date, but the actual dividends are distributed later.

Look up some stock with a high dividend and see how the price varies w/ the ex-div date if you want to convince yourself.

[DesertCat]

Didn't we just have an interesting discussion about this topic?

Posted by an attention hungry poster who is trolling for more kudos for his contributions to that thread.

[bills217]

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OK, back to the original question then. It's just a question of how the market is going to value a stock and if someone values a stock at $10 pre-dividend, they're going to value it at $9 post-dividend, right?

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Yes, I think I get this. The stock goes down by the amount of the dividend (approximately).

So then the question is...WHY DOES ANYONE GIVE A [CENSORED] [CENSORED] ABOUT DIVIDENDS THEN??? SERIOUSLY??? How many times have I heard dividend-paying stocks lauded? Why in the [censored] does it matter? Why are stocks that pay dividends better than ones that don't? Isn't this like lauding companies who pay their employees on Thursday instead of Friday, or that paint the cafeteria blue instead of green?

Edit: I don't understand the previous answer to this question. If you want cash, why not just sell some of the stock? If it pays you the dividend, it will go down vs. not paying a dividend, so WTF difference does it make? Just sell some of it if you want cash.

I do understand the (relatively minor for most people) tax implications and they aren't really important for my personal situation. I just assumed there has to be some other, more obvious reason that dividend-paying stocks are advantageous considering all the love they get.

[Mark1808]

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OK, back to the original question then. It's just a question of how the market is going to value a stock and if someone values a stock at $10 pre-dividend, they're going to value it at $9 post-dividend, right?

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Yes, I think I get this. The stock goes down by the amount of the dividend (approximately).

So then the question is...WHY DOES ANYONE GIVE A [CENSORED] [CENSORED] ABOUT DIVIDENDS THEN??? SERIOUSLY??? How many times have I heard dividend-paying stocks lauded? Why in the [censored] does it matter? Why are stocks that pay dividends better than ones that don't? Isn't this like lauding companies who pay their employees on Thursday instead of Friday, or that paint the cafeteria blue instead of green?

Edit: I don't understand the previous answer to this question. If you want cash, why not just sell some of the stock? If it pays you the dividend, it will go down vs. not paying a dividend, so WTF difference does it make? Just sell some of it if you want cash.

I do understand the (relatively minor for most people) tax implications and they aren't really important for my personal situation. I just assumed there has to be some other, more obvious reason that dividend-paying stocks are advantageous considering all the love they get.

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If you have exactally the same two companies that grow at the same rate then the one that pays a dividend will provide a better return.

You buy company A today and you get $1 dividend and the stock drops to $9. Over the next quarter it will move back to $10 relecting the anticipated $1 dividend. If you sell before the dividend 3 months from now you break even on the stock and make a $1 dividend. With company B you buy at $10 and 3 months later its still $10, no gain.

Many people believe that the company can better use the money it pays in dividends to grow their business at a faster rate than shareholders can grow the after tax proceeds from dividends. This is why high growth companies tend to pay little or no dividends while stable more mature companies tend to pay higher dividends.

[bills217]

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Over the next quarter it will move back to $10 relecting the anticipated $1 dividend.

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I don't get this part. Once the dividend is paid, the money is gone, right? Where does the value come in to get it back to $10? Why wouldn't it just move from $9 to $8 after the next dividend, assuming no growth, which in this case we are?

[T50_Omaha8]

Mark,

Is the company by any chance managed by Leprechauns who get their dividend money from a magic pot of gold?

Otherwise your argument falls apart.

[bills217]

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Is the company by any chance managed by Leprechauns who get their dividend money from a magic pot of gold?

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PM me with ticker plz