Need a little help with understanding stock market.

OP

*Star*Guitar*

The constitution/model articles of the company will probably set out what happens to the profits.
And shareholders are not legally entitled to a dividend, either. Its not often they're refused one, though.

Aaah, OK. So they could instead give out more shares instead of a dividend for example and that way they wouldn't have to give out money?

Reply 5

*Star*Guitar*

17

dude55

Aaah, OK. So they could instead give out more shares instead of a dividend for example and that way they wouldn't have to give out money?

No. They don't have to give shareholders a share of the profits.
That's nothing. Diddly squat.
Issuing shares is done in order to raise finance, either to existing shareholders or new investors.

Reply 6

OP

*Star*Guitar*

No. They don't have to give shareholders a share of the profits.
That's nothing. Diddly squat.
Issuing shares is done in order to raise finance, either to existing shareholders or new investors.

OK, I think I've got it now. So they might not give out any profits at all and the only way an investor could make money would be to sell their shares once they go up in value? Is that right? In which case they wouldn't be a very attractive company to invest in, would they?

Reply 7

*Star*Guitar*

17

dude55

OK, I think I've got it now. So they might not give out any profits at all and the only way an investor could make money would be to sell their shares once they go up in value? Is that right? In which case they wouldn't be a very attractive company to invest in, would they?

No it wouldn't be very attractive, hence why I said in my first post, that that is why a company would rarely withold dividends.

Reply 8

I've got a question for you:

how can you justify voting labour?

Reply 9

OP

Fynch101

I've got a question for you:

how can you justify voting labour?

Aha, my sig has recently attracted a lot of attention. Even though this is completely off topic, I justify voting Labour because I personally agree with how Labour intend to sort out the economy. Secondly, I disagree with how the Conservatives feel the need to pour money into helping people who don't need help. :smile:

I hope this is good enough for you, I don't want this to turn into another political rant thread.

Reply 10

dude55

Aha, my sig has recently attracted a lot of attention. Even though this is completely off topic, I justify voting Labour because I personally agree with how Labour intend to sort out the economy. Secondly, I disagree with how the Conservatives feel the need to pour money into helping people who don't need help. :smile:

I hope this is good enough for you, I don't want this to turn into another political rant thread.

Conservatives and Lib Dems have way better economic policies. How can you support a national insurance rise? Everything in history points to tories being better at recession recovery.

Reply 11

yoyo462001

16

Fynch101

Conservatives and Lib Dems have way better economic policies. How can you support a national insurance rise? Everything in history points to tories being better at recession recovery.

These would be?

Reply 12

Eldedu

12

yoyo462001

Wow what a useless post :facepalm2:

Silence! Eez funny.

Reply 13

BuffettIsRight

Dividend policy depends on 4 things:
1) Historical dividend patterns - if a company is used to paying a small, but stable dividend, it will generally continue to do so in the future, no matter how profitable or unprofitable it is. Any change from a stable dividend policy would be perceived by the market in a negative way and the share price would drop.
2) Management's ability to invest profitably - if its management is able, the company will find investment opportunities where ROIC (Return on Invested Capital) is greater than WACC (Weighted Average Cost of Capital) and add value to the share price. Share price = No-growth price + NAV (Net Asset Value) of Future Investment Opportunities. In such a case, no (or few) dividends are paid out. If management sucks and ROIC<WACC, dividends will most likely be paid out.
3) Shareholder tax situation - if the company's shareholders face better tax rates for receiving dividends, the company will pay more dividends. If the shareholders face better tax rates for capital gains, the company will buy back shares instead of paying dividends.
4) Management's belief about stock price - if management perceives the stock of their firm as undervalued in the market, they will buy back shares instead of paying dividends because the opportunity is good. And the opposite is true.

There's more... But I'm too lazy to type....

Reply 14

Antzlck

18

Company can choose to pay out 100% of it's profit as dividend or 0% or anything in between. It's upto the CFO of the company to decide whether to reinvest the money into the business or not.

Reply 15

yoyo462001

These would be?

Lib dems - not blowing 100bn on trident

Cons - No National insurance rise

theres tons but I'd say they're the main ones.

Reply 16

yoyo462001

16

Fynch101

Lib dems - not blowing 100bn on trident

Cons - No National insurance rise

theres tons but I'd say they're the main ones.

'Everything in history points to tories being better at recession recovery.' I was referring to this.

Reply 17

yoyo462001

'Everything in history points to tories being better at recession recovery.' I was referring to this.

John major/thatcher etc

Reply 18

SebWillis

dude55

I don't want this to turn into another political rant thread.

Too late.

Reply 19

OP