Comment by HumanReadable | Hacker News Reader

Comment by HumanReadable | Hacker News Reader

It's a well executed website, but there is no good reason for it to exist. You shouldn't be on a quest to find high yield dividend stocks in the first place.

Whether a stock pays dividends really shouldn't factor in to your decision as to whether to buy it. Any dividend a company pays out makes the company worth that much less. Whatever you stand to gain from the dividend, you stand to lose in the value of the stock you own.

When buying a stock the only thing that matters are its fundamentals. Ie. is the company's assets and future earning potential worth more than the current price of the stock to you? Unless you have information that the market doesn't, this is not a question whose answer you will reliably get right.

Good points, especially for value investing. It also seems likely that this logic holds whenever analyzing a traditional company. Once again, I'd ask whether the same logic holds for the ETFs and leveraged funds that encompass most of the stocks on this site?

There may be other reasons not to invest in such a stock, but I seem to keep seeing value investors trying to compare apples to oranges.

Why does dividend exist then?

Because companies want to return profits to shareholders. Share buybacks are more common now but achieve the same thing. If the company is still growing it should be reinvesting in the business rather than throwing off cash but some stable (or declining) businesses have no good way to do so. That’s why dividends can be a red flag.

> Because companies want to return profits to shareholders.

But the profits are already accounted for through the stock value.

No, the stock value accounts for the market's expectation of the aggregate value of returns by dividend, dissolution, buyback, or sale of the whole corporation with an infinite time horizon.

This is, in part, a product of the actual pattern of returns combined with the expectation of change: even if you are profitable, if the market thinks you won’t return any profits until the corporation eventually succumbs to gambler's ruin and dissolves with no residual value, your stock price will be in the toilet.

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