West Loop Financial LLCDo Dividends Lower Stock Prices? – West Loop Financial LLC https://www.westloopfinancial.com Evolutionize Site Wed, 19 Aug 2020 20:50:49 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.22 Do Dividends Lower Stock Prices? https://www.westloopfinancial.com/2014/05/13/do-dividends-lower-stock-prices/ https://www.westloopfinancial.com/2014/05/13/do-dividends-lower-stock-prices/#respond Tue, 13 May 2014 15:41:17 +0000 http://evolvemypractice.com/?p=918 There are many investors who have a hard time accepting the fact that when a company pays a dividend the payment results in a permanent relatively lower price (relative to what the price would have been the dividend had not been paid), not just a lower price on the day it makes the distribution. The problem results...

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]]> There are many investors who have a hard time accepting the fact that when a company pays a dividend the payment results in a permanent relatively lower price (relative to what the price would have been the dividend had not been paid), not just a lower price on the day it makes the distribution. The problem results from the fact that over time, as long as a company earns more than it pays out in dividends, the stock price will eventually increase to above the price it was before the dividend was paid (assuming valuations, or P/E ratios, remain the same or rise). Hopefully, the following examples should clarify why stock prices are permanently lowered in relative terms.

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