Uh, gee Tennessee, I bumped my head this morning and I had an epiphany and I want to teach you all about it. Although not all do, some businesses earn a net profit over time. This profit appears to be real in that the Government taxes these profits. Now, the business can use the remaining ~70% of the profits to reinvest in the business, pay out dividends, throw it down a rat hole, or some combination thereof. Here is where it gets interesting, if the business pays out the profits as dividends, the business is worth something. If, on the other hand, the profits are reinvested in the business, the business isn’t worth anything. Isn’t that weird?
Tennessee! Tennesse! I have proof that I was right. Me and Mrs. Chumley went to Walmart this morning. Our bill was about $200. I offered to give the check-out lady two BRK-B shares. I figered she would be getting a pretty good tip. She told me that BRK-B shares were not worth $200 to her because they don't pay a dividend. Becasue of this, I offered to give her a share or IBM, since they pay a dividend. Again she declined becasue they may reduce their dividend payout in the future. So, I was stuck paying with cash.
Tennesse, if the Walmart check-out lady can figure this out, why do the so-called brainiacs on this board struggle with it so?