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Stock Valuation A substantial percentage of the companies listed on the NYSE and the NASDAQ don’t...

Stock Valuation

A substantial percentage of the companies listed on the NYSE and the NASDAQ don’t pay dividends, but investors are nonetheless willing to buy shares in them. How is this possible since the value of a share of stock depends on dividends?

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Answer #1

Most of the shares which listed in the NYSE and the NASDAQ are small cap and mid cap since the capitalization of the company is less and they are in growing stage they won't pay dividends. Because investors perceive that company will grow fast if it invest it's earning in its business.

There are other methods to value at share of stocks like discounted cashflow methid and residual earning method which is not depends on dividends. So once investors see the growth of company in long run and find the value of these stocks as underpriced they are willing to buy shares of these companies.

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