Please provide a response to the below statements 80+ words:
Think about whether or not the arguments articulate and logical? Are their facts correct?
1)Jenn – The value of a share of stock depends on the dividend because the stock price today is equal to the present value of all future dividends. The payment of dividends is a way companies can encourage stockholders to invest additional funds. Investors are willing to buy shares even if the company does not pay dividends because according to our text what that really means is that they are not “currently” paying dividends. At some point the shareholder will get some payout because a company that is always at zero would be considered a financial “black hole” and the investment wouldn’t have any value. “When a company that traditionally pays dividends issues a lower-than-normal dividend, or no dividend at all, it may be interpreted as a sign that the company has fallen on hard times (Boyte-White, 2015).”
The value of a share of stock depend on dividends, which can relate to the preferred stock. The preferred stock is “stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without having voting rights” (Ross, Westerfield, & Jordan, 2016, p. 254). The dividends can be cumulative or noncumulative and if the stock is high or low and the board of directors can decide to whether to pay the dividends on shares or not. Just because no dividends are paid it does not mean the company is not in good shape.
A substantial percentage of the companies listed on the NYSE and NASDAQ don’t pay dividends, but investors are nonetheless willing to buy shares in them. This is possible considering that the company is simply investing in their company to expand. Most of the companies that are listed within these markets are high in value and if the company decides to sell and/or issue dividends the shareholders will have voting rights. “Holders of preferred shares are often granted voting and other rights if preferred dividends have not been paid for some time” (Ross, Westerfield, & Jordan, 2016, p. 254). Most preferred stock are not risky and shareholders are likely to continue to invest because of the low risk.