Week 3 Discussion 1 - get nothing. Another benefit is that...

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The question asked in our tutorial is: If a company has not paid out dividends to their stockholders, why buy shares? Personally I am not a big gambler, but apparently stockholders have at least one advantage over banks that get paid before they do. Even though banks get paid first once a company makes profit, they will always make the same amount of interest. If a company makes a large amount of profit and chooses to pay their shareholders dividends, they may receive a very large compensation for the money they have invested in the company. However, if a company chooses to reinvest in itself rather than pay dividends, the stock holders
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Unformatted text preview: get nothing. Another benefit is that if the company is making profits, the price of stocks should increase as well. At that point a shareholder can hope that someone else will pay them a higher price for the stock than they paid for it. A shareholder can stand to make a lot of money by selling their shares at a higher price as the company grows and continues to profit. Sources: http://news.morningstar.com/classroom2/printlesson.asp?docId=142901&CN=COM http://en.allexperts.com/q/Financial-Stocks-1075/Conversely-Dividends-Value.htm...
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This note was uploaded on 03/26/2012 for the course ECON GM545 taught by Professor Gotches during the Summer '11 term at Keller Graduate School of Management.

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