Are you getting only half?
So my main goal with stocks is to make money (duh) and so far I am not too bad at it in real life. However, I have a problem with just about everything in life where I over think them to the point where it becames too abstract. Nonetheless I get curious though, so this was my train of thought:
If a company has a P/E of 20, that means your earnings are 5% a year. For a more established company they would pay about 50% in dividends, giving you 2.5% and reinvesting the other 2.5% in the companys growth. So even though you are only getting 2.5% in dividends, the other 2.5% is invest in value for your company, so you still make a gain from it.
However, when a company is selling at way about tangible book value, its about earnings, not value. So if the P/E is 20 you are getting 2.5%, but that other 2.5% is adding equipment/things like that to a share of a company which is worth so much more than the rest of the stuff they already own. The reason stocks trade in multiples of what they are worth is their earnings power. But 2.5% dividend is not much earning power compared to bonds and other investment vehicles.
Capital appreciation is more important than stock dividend, but is it all just an illusion?
Just a random thought, not trying to be all alstry.