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Strategies & Market Trends : Strictly: Drilling II
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To: JWest0926 who wrote (451)8/23/2001 4:20:11 PM
From: A.L. Reagan  Read Replies (1) of 36161
 
the other conclusion is that my logic is flawed

It is. By your logic a stock that produced a $5.00 ps dividend each and every year, but the dividend never increased, would be worth exactly zero.

By my logic you'd capitalize the dividend at the long-term risk-free rate plus a market risk factor, which for a stodgy fart stock like our example might be 1/2 the normal risk premium, and a price in the range of $50-$60 per share would be derived, significantly greater than the zero your logic implies.
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