Comment Re:Has to be better than my other stock picks. (Score 1) 288
Really, most MBAs would tell you that providing a dividend is the exact opposite.
Company management generally assumes that people invest in company stock for the long term in the hopes that the stock price will rise. This is known as "increasing shareholder value" which is the optimum theoretical prime motivation for every business decision. Also, the idea is that shareholders are investing in the stock because they believe that's the best place to put their money to earn the greatest return on that money (in addition to other stocks they own to create a balanced portfolio that eliminates unsystematic risk).
So now, given that... why would providing a shareholder with a dividend make any sense? The dividend is money that would have gone towards a re-investment in the company (an acquisition, an upgrade, or even a high-interest bearing account) which would increase the shareholder's wealth as much or more as the dividend amount. (It still belongs to the individual shareholders even if it's in a no-interest checking account... so the value of the stock in that case would go up by almost exactly the amount of the dividend).
So, instead of re-investing in the company tax-free, you think it's a better call to pay taxes on a dividend, then pay fees for purchasing more stock with the money you get than just allowing your stock value to go up without any fees or taxes and selling it at a much higher price in the future? I could understand how someone on a fixed income might want a dividend paycheck to supplement other funds and not want to hassle with selling stock for cash, but really... dividends make very little business sense or much sense to an investor.
If you want to invest, buy stock or bonds... if you want a 3% return, get a money market account... not this hybrid crippling dividend bit.
Take Microsoft for example. They went for decades without a dividend and their stock prices soared. They weren't "not taking care of their shareholders" by not providing dividends. The only reason they started offering dividends is because they were throwing money into R&D projects left and right that didn't pan out and they had a HUGE stockpile of cash that wasn't doing anything for the company. People complained that if Microsoft wasn't going to use the money for reasonable investments, then they should give some of the money back to investors, which I completely agree with.
AMD can barely survive as it is without a dividend... and if it provided one, it would die b/c it's already losing money every quarter! Also, AMD does not care if you buy their stock unless they're issuing NEW shares. The stock floating around right now was bought long ago and AMD doesn't see a penny for any trades going on unless they're actually the ones selling the stock.