AlexR

The Risk Premium Puzzle, or Dividend Investing for Math Nerds

On Nov 25 12:53 PM Owen wrote:
> Apple, Dell and Berkshire are all highly valuable companies, despite
> the zero value the dividend model implies for them.

I think that's the whole point we all have been missing. In "normal" and low-priced markets, no company would have the "audacity" of offering zero dividends. That only happens during secular mega-bubbles. Once all the glamor of stock ownership is gone, stocks will fall until their dividend yield is meaningful. And without the cheap financing from the credit bubble, no market force will be powerful enough to arbitrage the dividend away.

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What about dividend reinvestment? The yield on the QQQQ although very small, is not zero. It might be just enough for a 9/17/2001 investment to be slightly profitable by now.