Why Worry With Dividends? Their Five-Year Reinvested Value for Simpson Manufacturing Co
The Power of the Dividend In a world obsessed with price movements of stocks, it''s easy to lose sight of what those prices represent -- the value of holding a company''s future profit potential. One of the key ways that profit potential turns into profit actualization in an investor''s pocket is the dividend -- cash (usually) payments made to stockholders representing a portion of a company''s retained earnings. Retained earnings is found under the shareholder''s equity portion of the balance sheet and represents the amount of earnings a company has left over after paying dividends to its shareholders. Retained earnings is calculated as: RE = BP Net Income - Dividends Where BP = Retained Earnings at the beginning of the period. Net Income = Revenue - Expenses Before further discussion of why dividends can be impactful in the long-term, here''s a plot showing how much of a difference reinvested dividends would make in one''s five year holdings of NYSE:SSD compared to holding the dividends as cash and regular price appreciation.
Why Worry With Dividends? Their Five-Year Reinvested Value for Simpson Manufacturing Co
The Power of the Dividend In a world obsessed with price movements of stocks, it''s easy to lose sight of what those prices represent -- the value of holding a company''s future profit potential. One of the key ways that profit potential turns into profit actualization in an investor''s pocket is the dividend -- cash (usually) payments made to stockholders representing a portion of a company''s retained earnings. Retained earnings is found under the shareholder''s equity portion of the balance sheet and represents the amount of earnings a company has left over after paying dividends to its shareholders. Retained earnings is calculated as: RE = BP Net Income - Dividends Where BP = Retained Earnings at the beginning of the period. Net Income = Revenue - Expenses Before further discussion of why dividends can be impactful in the long-term, here''s a plot showing how much of a difference reinvested dividends would make in one''s five year holdings of NYSE:SSD compared to holding the dividends as cash and regular price appreciation.