This doesn’t make sense to me. The ultimate value of shares is in the dividends they represent, no? If there are no dividends ever, what are they sharing in? Is it just a postponement until future dividends? A share in control of activities?
I get that there’ll be speculation that will keep values increasing, and selling can net a profit, but what does the last share-holder get?
The ultimate value of shares is in the dividends they represent, no?
No. The actual (and only) value of shares is investors’ expectation of the value of future appreciation in share value and of dividends. And there is not a constant relationship between share values and dividends: the price-to-earnings (P/E) ratio can vary hugely depending on the nature of the business and on investor sentiment-- for example, P/E can be massive during a speculative frenzy, with no underlying reason besides wishful thinking.
This doesn’t make sense to me. The ultimate value of shares is in the dividends they represent, no? If there are no dividends ever, what are they sharing in? Is it just a postponement until future dividends? A share in control of activities?
I get that there’ll be speculation that will keep values increasing, and selling can net a profit, but what does the last share-holder get?
No. The actual (and only) value of shares is investors’ expectation of the value of future appreciation in share value and of dividends. And there is not a constant relationship between share values and dividends: the price-to-earnings (P/E) ratio can vary hugely depending on the nature of the business and on investor sentiment-- for example, P/E can be massive during a speculative frenzy, with no underlying reason besides wishful thinking.