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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: flint who wrote (52353)	5/5/2001 10:44:44 AM
From: RetiredNow	Read Replies (1) \| Respond to of 77399

Flint, no one buys growth companies in growth industries for the sake of a dividend. Those on this thread claiming they'd rather have Exxon than Cisco because Cisco doesn't pay a dividend are just shouting to everyone "I HAVE NEVER TAKEN A FINANCE COURSE; I HAVE NO IDEA WHAT ARE THE BENEFITS OF A DIVIDEND VERSUS REINVESTING THAT MONEY IN MARKET OPPORTUNITIES". Dividends are primarily given out for multiple reasons, the most important of which is that the company's leaders don't believe they can use that much cash in creating new opportunities for growth for the company. Instead they use the dividend to prop up the return on the stock the shareholders can expect. For example, on any stock I buy, I have two ways of earning income: a) incremental stock price appreciation and/or b) dividends. At any given time I can calculate my return on investment as (a + b)/cost basis of stock. Companies like Exxon, can't use all the cash they generate, because there aren't limitless opportunities in the oil space. Companies like Cisco have a number of market opportunities and can readily find investment opportunities, so they don't give dividends. The caveat is that, yes, Cisco is a riskier investment. With good companies, risk is in direct proportion to return. As far as a stock's real functional purpose, the reality is that it will always be a + b. To say that "a" should never be a consideration for investors is ignoring half of what people invest money for. In fact, I'd argue, it's many times a lot safer to put your money in tax free munis or govt bonds. Why take any risk at all? That's the endgame in your line of thinking. You must have alot of money to be focused solely on wealth preservation.