The effect of dividend yield on stock, positive or neutral?

[counting]

As I was pondering about factors might affect stock performance in general, one of the factor - dividend yield puzzles me.

In general, it has no effect on EPS, but by paying dividend the amount of cash does drop. Assuming the most extreme cases, two company with the same steady net profit and all other starting conditions, but one pays 100% ratio and another none. 10 years later obviously the formal one will have exactly the same condition as before, and the later one will be the same but with extra cash accumulated. So will the company with more cash hence more assets have higher stock price level, or is this factor neutral to stock performance?

IMO, I would think a higher cash position should give a company more "potential" to expand, hence give investors more confidence. But on the other hand, if you don't spend any cash, there shouldn't be any effect at all.

[therealevan]

As far as what effect dividend yield has in game, I'm not entirely sure. Any realistic yields (5-15%) don't seem to have any real crazy corresponding effect on the stock, if anything it's a simple cash infusion for any shareholder at the end of the year. This is why sometimes while in the month of december I'll purchase shares in high yielding stocks so that I can get some cash when their dividend is paid out, then sell everything off.

[counting]

Back in Cap2, when I've held 100% company's stock, I would set dividend payout above 50%. By doing so, I always had the feeling that the stock price becomes steadier than no dividend payout. However, since personal cash often acts as emergency stash for me, so sometimes I would issue new shares to move personal cash back to the company. After that, the EPS would drop and the stock price would temporarily suffer, before next investment's payout kick-in and EPS rise up again.

In general, I've used this as a way of controlling stock price. However, I really want to know if dividend payout has any positive effect on stock performance. I wonder how should I test it. (From the Cap 2 manual, it says dividend has no effect on stock price, buy I'm not sure if it still holds true in Cap Lab)

[therealevan]

Not exactly on topic of dividends,

but in my game im in the year 2051, I've noticed that roughly 90% of the stocks available for purchase are owned 100% by one person. It appears the AI has bought back a big number of shares and allowed for the company to either be bought out by someone, or the CEO was paid a high enough salary to buy all the stock.

[counting]

From my observation, AI behave with various stages. At the beginning of a company (not necessarily the beginning of the game, since some AIs might join later when some get bankrupt, or merger) it's in an expansion mode, where AI tends to issue as many shares to accumulate capital as much as possible (when it "sees" there is market opportunity existed). But AIs have different personalities, some like to issues more shares than others. When the business is growing AI will remain in "low share holding" position depend on its tendency of buying stock. After that when its business is steady or market opportunity vanishes, AIs will buy back its market share no matter what.

It's also interesting that AIs tend to set quite high personal salary level (the level similar to a COO players can hire). When business is growing, and AI has high tendency to issue dividend, it gets even more wealth and buy back shares even quicker. In some extreme cases, with the combination of high dividend payout, low issuing tendency, and high tendency to buy back, it can reach 100% control within decade after it started (the most difficult kind to deal with if you don't buy some of its share early one). Also AI prioritizes issuing share over loans from bank, and only AI who is deep in financial trouble and maxed out the capacity to issue new shares, turn to bank for loans.

[therealevan]

And eventually, like in my game, around year 2050 I have stock prices that exceed $2,000. I'm sure they've been at that level for a while but I just started to look at the market. Anyways, it makes it a bit of a challenge to find opportunities when they dont issue anymore stock!

[counting]

This game is called "Capitalism" for a reason, not "Industrialism". Running a corporation isn't just about producing goods, but various ways of managing capital in any form. Manufacturing is just one of them that could have high profit margin. Normally players should invest in capital game sooner than later, or as time goes on others who invest in capital early on will have advantage in that arena. As the saying goes, don't put eggs in one basket, and players should always dabble with all aspect of the capitalism game since the beginning, or suffer the risk of single minded strategy.

Back to your current situation, at this stage of the game, it's like a war game, where opponents have already build up their defenses to max, it will need some hard battles to crack. Hitting the enemy head on can be done (or even just buying competitor stock with premium price is doable during recession period, however you need vast capital at hand), but would be the least favorable strategy. Circle around and find weak spots, such as cutting off upstream of a target, finding an unclaimed market to increase your arsenals (like real life Apple, they failed in PC, but years later come back in mobile market, how's the current game's communication or camera market? Even game consoles. Any product has similar semi-products you currently have would be a place to start). Even a price nuclear war can help (produce competitor's other cash cow product using minimum investment like with small factory and set the price to 0.01 in retail) to hinder AI's profitability and expansion. Sometimes even helping a weak competitor of the target corporation's other products (enemy of the enemy), so your temporary ally can produce more products in its less competitive product market (this works due to most of the time AI suffers from upstream difficulty and by providing them better upstream quality you and your "ally" can both profit at the expense of you common enemy).