The Dividend That Could Sink Google
Hey Trader, Picture a company telling you it’ll start paying you a dividend every quarter. You’d probably call that good news. If that company is a growth stock, the announcement can cut its price in half. Take Google. It’s a $338 stock. If it announced a recurring $5 dividend tomorrow, I’d expect it to trade at $200. Finance calls this dividend signaling. A dividend reveals what management privately believes about future earnings and cash flow. Insiders know far more about a company’s cash than you or I do. The dividend is how they tell you. That signal works in opposite directions, depending on who sends it. When Procter & Gamble or Exxon raises its dividend, the stock tends to climb. I taught a case study on this at least once a semester for six years at DePaul. I’d still bet 99% of you have never heard of it. A dividend