How to make money with non-dividend paying stock?
For example a share is priced at $20 i buy 2 shares of it for $40, with dividend i can buy 3rd share and if they don't pay dividend even if the price of shares goes up from $20 to $40 how am i able to buy 3rd share or create cash flow from it?
- zman492Lv 77 months agoFavorite Answer
<<<How to make money with non-dividend paying stock?>>>
You make money by selling the stock for more than you paid for it.
You do not increase the value of your investment when a stock pays a dividend. If a stock is priced at $100 and it pays a $1 dividend the price of the stock drops by $1 when the dividend is paid, so the value of the stock becomes $99. You probably will pay tax on the dividend you received. If you pay 10% tax on the dividend you net return on the $0.90. when you add that the new lower stock value you now have a stock worth $99 plus $0.90 cash for a total of $99.90. If the stock had not paid the dividend you would own a stock worth $100.
You do not have to buy more shares of a stock to make money. I usually do not buy additional shares of a stock that I already own. I am quite satisfied to let the value of an investment I own go up in value. If the stock price goes up from $20 to $40 I have doubled the value of my investment without buying additional shares.
I do not buy stocks to create a cash flow. Stocks are generally not a good way to generate a cash flow. I have at times generated cash from stocks I own by selling covered calls on the stock, but I understand I am risking giving up potential profits.
- ?Lv 67 months ago
In most cases, the amount you can make on the stock alone without the dividend is worth more than the amount you would make in dividends. That is unless you held the stock for decades and the stock always paid the same dividend or better and the price of the stock has not increased much. Do the multiplication on how many shares you have times the amount the stock pays in a dividend if it does pay one. In my opinion, stocks that pay a dividend are overrated. Maybe thats just because Im not a a big baller, but you do the math and decide for yourself.
- Anonymous7 months ago
No you can't buy a third share with the dividend. Stocks don't pay 50% dividends.
You are able to buy a third share by taking $40 of your paycheck and buying a third share.
If cash flow from your investments is what you want, stocks are not where you should be looking.
- Robert B.Lv 67 months ago
Dividends are only a couple of dollars per share so you are not going to buy a 3rd share if you have two shares of stock. The only way you make money with non dividend paying stocks is to buy and hold and hope it goes up then sell. This is a long term strategy usually, taking years to make any substantial money. Find a good mutual fund, I suggest Vanguard. The total stock market fund would be a good one to start off with. Put a little money in each month until you retire and you will be rich if you don't touch it until you retire.