PixieBaronicsi t1_jeew1sx wrote
If a company is making a steady profit, but otherwise everything is remaining the same then one of two things should happen:
- The company keeps its profits in the company, meaning that the company gets more valuable over time since as well as the profitable business it now has cash in the bank
- The share price increases slightly each year and then falls when it pays the dividend, repeating a constant cycle each year
The shareholders see the same return either way, either in cash or an increased stock price
telionn t1_jefil2t wrote
It's important to note that in case 1, the value of the shares only goes up because of the theoretical possibility of dividends (and stock buybacks, and any other similar schemes). If companies had no way of returning cash to investors, stock would have no value.
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