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Re: "is a good deal for as long as the dividends continue" Posted by Caarma [Email] (#592) [Profile/Gallery] (more from Caarma) on Wed, 25 Jun 2008 10:45:00 In Reply to: "is a good deal for as long as the dividends continue", Bill Homer [Profile/Gallery] , Tue, 24 Jun 2008 20:43:56 Members do not see ads below this line. - Help Keep This Site Online - Signup |
I don't know the complete history, but I believe GM has been providing dividends continuously for many years. They did reduce the amount a few years ago. One thing you're forgetting is that dividends make a stock more attractive to an investor. If you compare 7.5% return per year with the given level of risk, it's pretty good. The share price could go up, or it go down, but if you buy shares right before the divident pay-out effective date, you could make some decent money. I don't think GM will go under. If anything, they will merge or be bought out and that may increase the share price.
From what I learned in Corporate Finance class during my MBA program, the value of a share of stock is based on the present value of all future dividends. If GM were to get rid of their dividends, that would lower their share price which isn't a good thing either. Perhaps "sound fiscal policy" isn't always the best thing to follow.
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