Question

If a corporation in a stock market is having high income and it has potential for...

If a corporation in a stock market is having high income and it has potential for growth and it’s srock price almost not changing too much but it doesn’t pay dividend for 2 years ? Is it good for investment or no? This inc’s stock is rising today and it is green.And what other factors to consider if investing in this inc. good or no?

Homework Answers

Answer #1

having high levels of income and still no dividiends clearly points out towards the intent of the management to engage in a very large development be it expansion ie setting up of a new factory/ expanding the existing one. This means that the profits that are earned today are retained and thus would be suggested as a buy as expansion usually is followed by even higher profits and higher returns . the profits will ultimately reach the shareholder sooner or later . As the stock price have not yet increased to its full potential it is the best time to buy the share and hold it  

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