When invest in stock market, why are people so hard up over dividends?

Hopefully I add something new to this discussion. I'm going to say it from a different direction.

Paying dividends is not "left hand to right hand". In the boundary case, this would apply only to a company that only has cash as an asset and even then cash can be deposited into a bank account and earn interest. A company has assets that generate cash (hopefully).

The reason why share price tends to drop after ex-div is simply due to a no-arbitrage effect. If the share price did not drop ex-div, then I could buy shares just before ex-div, and sell them after ex-div, and collect the dividend at the same time. Exdiv drop is just the market's response to removing an arbitrage opportunity.

The constant thread I see in this discussion is that dividends are concrete while earnings rely on your interpretation of someone else's presentation of the company's financials and prospects.

Another slanted way to see it is like this. I have a stock with price that behaves like this: Price x (B + At) where B is dependent directly on the general market and A is the expected (mean) annual return over time. From experience B is much larger than Ar over short periods of time, so that to a casual observer, it might seem that the stock price just bounces around, but because B is random, it will eventually end up as zero over time and you earn At in the long run. In such a case, receiving dividends is making part of that return deterministic (certain) every year, and it ends up smoothing your earnings noise over time. But of course, you still have to do your homework to make A as sure as possible !

Dividend is probably the only direct indication of the management alignment of interest with minority shareholders.
There are quite a few companies in SGX that has low price-to-book ratio or/and even low PE that technically should be the targets of value investors.
But, they aren't simply because the value is there but the lack of dividend creates a distrust that the either the earning is dubious or the management is simply unwilling to share the earning.

I suppose there is a correlation or causal relationship between the dividend and management's attitude towards minority shareholders or even integrity.

How about exploring the parent company feeders - past, present, and future?

Some names I can immediately think of right now: STXOSV (no longer), UE E&C, Kreuz (no longer?), the Capita-structures incl. Ascott?, Cache/Sabana (looking at CWT and ARA), and so many others but can't even begin to scratch the surface of these things, without a proper study.

Then it should be easy to decide whether it is better to be the parent or the child...

Looking for high dividend and consistently-paying yielders, who obviously and regularly pay their parents(!)

My 2 cents is that TS may have a shorter investment horizon than alot of the buddies here. The examples TS posted are mainly small caps that are not really representative of the entire dividend investing concept. I agree with him if dividend is financed by capital rising then the business itself is maybe risky as it is unable to generate enough cashflow for a sustainable business or has too much capital cost to pay. I will only invest in these companies if I am exactly aware of its growth potential and I have too much cash to spare. If I have limited capital, I rather play safe and not invest.

I screened for dividends because in general, I like management's stance of returning surplus funds to shareholders. However, in markets where sharebuybacks are common, I do not use dividend screens because I do not want to miss out on companies that enhance shareholders' value through sharebuyback. I think sharebuybacks can be a better tool for aggressive capital management to benefit superlongterm investors but dividends are better for those investors that seek regular income (they need not reduce the holdings at unfavourable market prices to raise cash).

The challenge for dividend-based investors is that their universe may get shrunk by increasing use of sharebuybacks. Problem is that you can screen for dividends but you cannot screen for sharebuybacks (other than monitoring announcements and disclosures).

Whatever it is my absolute return UTD shows dividend returns make up to 25 to 30%. In some specific case, it is even more. So it is quite important to me.

(27-12-2013, 09:34 AM)mrEngineer Wrote: I will only invest in these companies if I am exactly aware of its growth potential

how do you judge its growth potential? What do you see?

You see the news? Which news source? How do you analyze these news source?

You see their industry group? What indicators do you use?

You see their financial reports? How to see their financials to pin point them as a growth company?

(27-12-2013, 10:09 AM)fat al Wrote: I screened for dividends because in general, I like management's stance of returning surplus funds to shareholders. However, in markets where sharebuybacks are common, I do not use dividend screens because I do not want to miss out on companies that enhance shareholders' value through sharebuyback. I think sharebuybacks can be a better tool for aggressive capital management to benefit superlongterm investors but dividends are better for those investors that seek regular income (they need not reduce the holdings at unfavourable market prices to raise cash).

The challenge for dividend-based investors is that their universe may get shrunk by increasing use of sharebuybacks. Problem is that you can screen for dividends but you cannot screen for sharebuybacks (other than monitoring announcements and disclosures).

i guess dividend + buy backs are good screens, but not practical?

Some people different invest/trade style.
Gone were the days, people read books, try and modify strategies based on their style and now look for short answers from forums?

Guess DW had his followers from EDMW to create senseless threads

http://forums.hardwarezone.com.sg/eat-dr...64-32.html

(27-12-2013, 07:55 PM)wahkao Wrote:

(27-12-2013, 09:34 AM)mrEngineer Wrote: I will only invest in these companies if I am exactly aware of its growth potential

how do you judge its growth potential? What do you see?

You see the news? Which news source? How do you analyze these news source?

You see their industry group? What indicators do you use?

You see their financial reports? How to see their financials to pin point them as a growth company?

All the answers are likely available from a good book e.g. "Common Stocks and Uncommon Profits" by Philip A. Fisher.