IBM gave investors something to cheer about today - Big Blue will not be nationalised any time soon. The company pre-announced a summary of its third quarter results, which show it has hit targets for the period, and fully expects to continue to do so. Earnings per share were $2.08 compared to $1.68 for the third quarter of …
If IBM was a nation...
...this would place them at place 55 (of 180) in the world (as per GDP).
Is it just me, or does it not really look all that inviting to invest in IBM? You pay $90 for one share, and get dividends of about $8 per year so it'll take around ten years to get your investment back and begin to earn money.
WTF? If IBM is one of the better stocks, then no wonder the stock market is in such sad shape.
Pirate, 'cause anybody making money in the market is just stealing it from doofuses.
Assuming you mean "investment", you seem to have neglected that you have not lost the original value paid out for the stock.
So if you pay $90 for 1 share, earn an $8 dividend and then sell that share for $90 ... you have made very nearly a 9% return in a single year.
Or are your action figure dolls appreciating at a faster rate?
@AC - the dividends aren't there to "get your investment back". You would sell your investment to get it back. What you are getting is a return on your investment. $8/year for $90 is 9% - not that bad.
Mind you, buying shares to earn dividends is fairly pedestrian, the usual ploy is to borrow them just 10% margin and sell them back a week later when they have gone up a bit.
I DON'T still have the original $90. I have something that 1.) brings me $8 per year and 2.) that I COULD sell to recover the original $90 - provided the price hasn't dropped in the mean time. I do NOT still have the original $90.
Yeah, right. I'm out 90$ to get $8 per year. I could sell the stock, but in the mean time it's dropped value by 10%, and I've lost money.
This is all what's wrong with the stocks market. You have a paper value that could evaporate on you at any time, and what you have just described is not investment but speculation. Speculation is gambling on the value of a stock as your fellow gamblers perceive it. If they panic and start selling, the value drops. If they believe a crappy stock is good, they'll buy it and drive up the price.
That "pedestrian" tactic is known as investment. Looking at the dividends is the way any rational person should buy stocks - how long will it take from purchase to the time the dividends will become a profit for me.
Try this for "return on investment:"
I build a factory that costs 90million and earns me 8 million per year (above operating and maerials costs). It is going to take that factory 9 years to pay for itself - just like that 90$ stock. I have the factory (or the stock) which I could sell and get back the original investment - but how much will my factory be worth when I sell it? The price I can get for selling it won't be the same as what I paid to build it, and the value
Sell your Sun Stock!!!
Sun has never, will never give a dividend and the market value is now $4.4B when just three years ago they used to have $7.4B of cash on hand.
Yeah, their strategy worked through bad times like totally losing OS market share despite OS2 and the good times like when they virtually allied with Nazi Germany ...
Are you one of those people who feels the need to explain to all and sundry that "PROFIT is the difference between INCOME and EXPENSE", in order to prove that you are channelling the ghost of Adam Smith?
Dividends are not the reason people invest in the stock market. What you are doing is loaning your capital to a company on the basis that the company will use that capital to grow and therefore increase the value of your shares. Of course it is a bet. You are betting that the company is competent enough to grow. Look at a 5-year chart of IBM's performance. If you had been smart enough to buy IBM shares in 2005 when they were around $75 (as I did), and then you sold them a couple of months ago when they were around $120 (as I did), then you wouldn't give a damn how much the dividends were.
Seriously, dude, there are books out there that tell you how to do this.