Originally Posted by RunningBum
Different slant so I'd like to respond. I don't try this myself but I can see that it might not be completely neutral. But for the long term investor, doesn't it correct itself to be neutral? The stock is going to be priced based on its fundamentals and outlook, and not be affected by the distribution in some of it's cash, right?
You already know I am an investing wimp based on the KMI thread, so take what I think with a grain of salt, as now its my turn to turn "theoretical" which I am guilty of myself. A stock's worth is ultimately only what any individual or organization is willing to pay for it. Not any inherent value of the company. Take one of my 6% preferred stocks. If it gets sliced in half in one day, and fundamentals are fine I got my money back whole in 12 years. If I reinvest all the divis at 12%, I become whole years and years earlier. If a stock has no dividends and is halved and investors never bid up price, you never become whole again. I admit its meaningless theory, but it soothes my mind. And the fact that I just need a company to maintain status quo and not need growth to move the stock is reassuring...but that is just me, life as a preferred stock investor.
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