I understand that a share of stock represents a share of ownership in a company. But if dividends are not paid, what is the actual value of that stock? Why does it have value? The company making more money does not flow to me because I own the stock. So is it basically just like owning a baseball card in that if the player (company) does well more people want to collect (own) their cards (stock) and this the price goes up?
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A lot of other people here are talking about “company value,” company value comes from ability to pay dividends so those answers are kind of a cop out. But you are right, it all comes back to dividends, however not necessarily paying them.
Share price is based on the ABILITY to pay dividends and being able to pay those eventually, not the dividends actually right now. That “company value” can at any time be turned into dividends should the shareholders choose to do so by selling those assets off and distributing the proceeds as a special dividend, so the company is in other words “backed” by these assets. Income is the second way companies have value, profits could also be reinvested in the company to increase future profits/dividends and this itself increases share price as potential future dividends rise.
Usually investors are perfectly happy if share price rises instead of getting a dividend, in fact its often better for tax reasons. So it works out for them too. A company can of course fail before it pays any dividends at all but once again its the ability to at any given time which gives the shares these values.
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