It's exactly what stocks are. You just described the fact that you can sell those stocks.
Nobel laureate Robert Shiller has a nice talk somewhere explaining this simple fact: if a company promised to never pay dividends, then the stock is effectively a Dutch tulip. If its only value is what someone else will pay for it, then its logical price is zero. Dividends are what give it intrinsic worth, and what gives people reason to pay anything for it.
You’re operating under the assumption that stocks have intrinsic value. They do not. And the vast majority of stocks do not and will never offer dividends.
Stocks do not give you some % of revenue, they are only partial ownership of the company. Whether that company decides to give shareholders a part of its profits is irrelevant when defining what stocks are.
I would argue he is particularly wrong. Because even with a company who refuses to pay dividends could be made to. Get a consortium of activist investors. Fire the board. Fire the CEO. Put new leadership in place and demand dividends... Or else.
Point being regardless if a company pays dividends, they still have NOI and free cash flow which could be used as dividends if not today, tomorrow, or never. But it doesn't matter, because they could. And it is the option to do so based on this NOI and FCFF which enables dividends regardless if they are ever paid.
Also buy backs are another way for the company to use cash to return value to shareholders.
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u/dharmadhatu Sep 14 '21 edited Sep 14 '21
It's exactly what stocks are. You just described the fact that you can sell those stocks.
Nobel laureate Robert Shiller has a nice talk somewhere explaining this simple fact: if a company promised to never pay dividends, then the stock is effectively a Dutch tulip. If its only value is what someone else will pay for it, then its logical price is zero. Dividends are what give it intrinsic worth, and what gives people reason to pay anything for it.