From: Brian Atkins (brian@posthuman.com)
Date: Wed Sep 11 2002 - 22:00:39 MDT
Lee Daniel Crocker wrote:>>(gts <gts@optexinc.com>):
>>Profits, not dividends, are the driving force behind stock prices.
>>Dividends from public companies are irrelevant except in so much as they
>>are one means by which owners can receive some of the profits.
>>
>>Consider a privately owned "mom and pop" business placed up for sale.
>>Such private businesses pay no dividends, yet they are valuable on the
>>market. The potential buyer of a private business will calculate his bid
>>based on the present value of the expected stream of future profits,
>>adjusted upward by the book-value (tangible assets minus liabilities)
>>and downward by the expected variance of future profits (risk).
>>
>>The stockmarket is no different. A profitable company with a firm
>>resolve never to pay a dividend would still be valuable to potential
>>buyers, for the same reason that the private company above is valuable
>>to potential buyers.
>
>
> Bzzzt. Thank you for playing.
>
> You're comparing apples and oranges here: dividends are the /means/
> by which /publicly owned/ companies distribute profits to their owners.
> If they only made profits and kept them in the bank, there'd be no
> reason to own the stock. A privately held small business distributes
> profits directly because they basically have only one shareholder who
> owns the company's bank account. The directors of a publicly held
> company /cannot/ take profits directly. They have a legal fiduciary
> responsibility to manage the company's assets on behalf of the
> shareholders, for their benefit, and to distribute its profits to
> them as dividends (eventually).
>
I disagree. Intel is a public company with no plans to offer a dividend
which keeps all its profits in the bank. Do you think the Intel Corporation
is worthless? Directors of Intel only have the duty to increase the value
of Intel stock. If they determine that never paying dividends, and instead
investing that money into R&D is the best way to raise the stock value, then
that is their duty, and shareholders should be pleased.
-- Brian Atkins Singularity Institute for Artificial Intelligence http://www.singinst.org/
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