Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Does It Matter If Commodities Pay Dividends?

Whenever physical gold or related commodities go down in price, the argument that they do not pay a dividend is trotted out as the reason why commodities or gold in particular is out of favour. Why does this matter? Many investments do not pay dividends: Most companies, venture capital, some real estate, collectibles, private companies and possibly cash investments in bank accounts. Why is the dividend argument so persistent? Many investments are based on capital gain potential or the expansion of equity. Assuming dividends are required for an investment to be favourable is true only if stable income is necessary.

The idea that commodities do not pay dividends is sometimes extended to include that commodities have no fundamentals. The word "fundamentals" in this case refers to the idea that if someone is not willing to pay for a commodity than it is worthless. Is this not true with any product or business? Commodities are used to produce many goods that are used every day and are considered essential to the well- being of society.

An expansion of the "commodities do not pay dividends" argument is the fact that commodities cost money for storage. Yes this is true, but idle businesses, vacant real estate, collectibles and start-up companies also have ongoing costs that are there whether the investment produces revenue or not. Any investment that requires ongoing maintenance has these same costs but this is not cited as a reason if the price goes down, real estate or venture capital being examples.

Gold and commodities have been out of favour recently. Every investment goes through periods like this - what I am suggesting is that the lack of dividend is not the reason why.






Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.