Sources of Shareholder Value

Earnings and Dividends

The importance of dividends for providing wealth to investors is self-evident. Dividends not only dwarf inflation, growth, and changing valuations levels individually, but they also dwarf the combined importance of inflation, growth, and changing valuation levels.


It is just after 4 p.m. eastern time, and the major U.S. stock exchanges have just closed. The anchorperson of one of the major financial networks excitedly proclaims: “Intel just out with its earnings! It ‘beat the Street’ by 20 cents, and its price has jumped $2 in after-hours trading.”

Earnings drive stock prices, and their announcements are eagerly awaited by Wall Street. But exactly how should we calculate ...

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