Question

If I am looking to maximize my investment as an investor and the company I am looking at has a low or unstable payout schedule, what would be the point of investing?

Answer 1

When you Invest in a stock or then you are expecting to have dividend gain as well as capital gain from the price. Dividend gain is when the company is paying a periodic dividend and the capital gain is when the price of the security in which you have invested have gone up. If you have invested in a company that has low or unstable payout and if that company is in the early stage of its growth then the company normally pays low dividend and reinvest the major portion of its earnings to boost the growth and revenue and in that case you will receive high capital gain if the company is successful. There have been many instances where the company does not pay dividend at its early stage of its growth and but later on in few years the capital appreciation compensates the investors far more than the dividend income would have done for them. The idea is look for companies which matches your investment need and you benefit from it in the long term. If you want stable income then invest in blue chip companies or dividend aristocrat companies and if you do not need income immediately and can wait for few years then look for companies which are in the early phase of its growth and expected to grow significantly over the next couple of years and even if they do not pay significant dividend now, that is ok because the capital gain is often significant.