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Stocks, stock prices and dividends NOVICE question.
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Posted 3/26/2020 16:58 (#8140913 - in reply to #8140794)
Subject: RE: Stocks, stock prices and dividends NOVICE question.

Thud - 3/26/2020 15:42

I'm not sure how to ask this so bear with me.. How are stock prices set? Simple right? I get supply and demand etc. In my example lets say that company "A" has 1 million shares traded on the DJ. Lets assume that stock is priced at $10/share and reliably pays a dividend of 5% on those shares. Now I as an investor own 1000 shares, at an average price of $10 (price is irrelevant for this question.). Now through my broker I have the account set up to re-invest any dividends from the stock, back into the company. So my 1000 shares give me $500in dividends on a yearly basis. Ignoring the tax side of this... that $500 would allow me to purchase an additional 50 shares per year. So now my question. If the 1million shares are already spoken for, how do I buy the additional 50 shares???( its done automatically ) What effect does this have on share price? Probably a simple answer but I'm a novice investor and up to this point I've relied on my advisor/broker for this type of thing.

Something to keep in mind Thud. It's almost a 100% guarantee that every company will be cutting and probably completely eliminating their dividends in the next little while due to massive losses and low cash. So don't invest for dividend right now. The stock needs to be good value for other reasons.
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