Divedends

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Divedends

Postby Raymond on Thu Sep 10, 2009 11:31 am

A lot of players seem to be ignoring the divedend settings, so I thought I would chat for a second on how and why I use devedends in my company.

Simply put, divedends are a way to transfer money from the company to the shareholders.
If you own a lot of the shares in your company, then that can mean you, as well.

At the beginning, divedends don't have much of an impact on your company, so ignoring them is safe and easy to do. But it isnt really the best thing to do. If you offer a small but noticable divedend, it will cause your stock price to rise faster.
The easiest way to tell is watch for the little green arrow on your report page. When it shows up next to the set your divedend button, your divedend is high enough to drive your stock price up. You may want to wait until you have bought as much stock in your company as you can. Either running out of money, or hitting the seventy percent limit.

But I want my company to grow fast, and giving money away slows that down, you say. If you get too carried away, it does.
But you need to remember, when your company resets, its the stock price that determines how much money you get, not how much cash your company has left. All the money and products the company has go away at the reset, and only the stock price matters then. Stock prices normally go up and down slowly, so its the small but positive things you do from the beginning that help add up to a higher stock price later in the game.
So, simply put, offering a divedend will cause your company stock price to go up, which means you get more money for the stock when you sell it later. It also means you, as a stock holder, get some cash you can invest, probably in more stock.
It will stop rising after a while, but at a higher level than it would without a divedend. If you remove the divedend, the price will start to go down to the lower level.
It takes practice to find the right balance, and that is part of what the game is about.

I hope this helps some,
Ray
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Re: Divedends

Postby Shimizu on Thu Sep 10, 2009 8:00 pm

Ray that does help, but when you say 'stock price' are you referring to 'market cap' or 'price per share' or what?
Also how does 'your stock has split 2 for 1' tie into this? I don't really understand what all the numbers on the stock options mean, I just typically buy as much of my company as I can and I've recently learned certain people I keep seeing on the high scores (Ray/Toastmachine/Kirha) are typically good investments, or I'll look for a company that's doing well that has a dividend to invest in, to get my player cash up. Also can you elaborate on how stock price effects starting cash? To be honest I noticed that I got 'more' but wasn't really sure why that was...:)
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Re: Divedends

Postby Sator Arepo on Fri Sep 11, 2009 8:14 am

Thanks for the post, Raymond.

I'd only started playing around with the dividends in anticipation of Opera Rotas Mark II coming to an end--and then we hit an extended period (3, 4+ years? more?) of Panic and/or Recession. My stock price took a major nosedive, and I ended up with about 2/3 of the starting capital I had anticipated for Mark III.

I guess all I really learned was not to raise the dividend rate too high when times are Booming, because lowering it later really messes with your stock price.

(Those three sentences probably encompass everything I know about personal finance economics.)

Glad to see people posting, it helps the feeling that the game is a community, which is lacking at times.

Regards to all,
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Re: Divedends

Postby Raymond on Fri Sep 11, 2009 10:40 am

Market cap is what you get when you take your stock price and multiply it by number of shares, so when the price per share goes up, so does your market cap.

Kit set the game to keep the price per share between five and twenty dollars.
When your price goes above twenty a share, you get a two for one stock split, and your price gets cut in half.
If your stock price goes below five a share, you get a one for two stock split(really a merger, but anyways) and your price a share gets doubled.
Its a accounting trick to keep the price per share something anyone can feel safe investing in while learning the game. Without it, there would be players at the top whose shares go for thousands each, and players at the bottom with shares going for pennies.

It also encourages you to learn what the other bits of info on the stock market page refer to. They are hyperlinks, so if you click on them, it takes you to a short description of the term and how it relates to company health. Very helpful(Thanks Kit!)

You start the training game with 2 mil, I think(its been several months for me, almost a year)
After that, your company starts with five million in stock. If you have at least three million in cash at the time of reset, you get to buy sixty percent of the company right at the start. The rest of the shares are offered to the market, and you have to pay the fifteen percent stock offering fee, so how much cash your company gets varies a little depending on how much cash you have at reset.
If you have the three mil, you only have to pay fifteen percent on the other two mil, so you are out about three hundred thousand.
If you have less than three mil, you will be out a bit more, the first time you restart you only have one mil, and I cant remember if it gets all invested or only half. So, if its all invested in your company, then you are out fifteen percent times four mil, or six hundred thousand.

Hope this helps.
Ray
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Re: Divedends

Postby Shimizu on Fri Sep 11, 2009 12:28 pm

Alright, so best case scenario you're looking at 4 million & change for startup, if I understand you correctly? And this is based on personal cash you had at end of previous round?

I'm still kinda fuzzy on how its related to your stock, though. At least in terms of retirement. This finance stuff is all totally unknown to me, I'm sorry if you feel like you're talking to a brick wall, hehe. I understand the reason for the stock price to stay between the 5-20 range, but what I don't understand exactly is if having it split is a good thing or not. Whats the advantage to that? The price goes down, but the number of shares doubles? What does that do for me, cash-flow wise? Do I have to buy all these extra shares? Are my existing shares already doubled? I get the message that says "Your stock has Split" (usually makes me feel like I'm doing well, hehe) but it doesn't really tell me what that does for me in terms of numbers.

And if as you say your starting cash for your company is dependent on your hrm, this part :
You start the training game with 2 mil, I think(its been several months for me, almost a year)
After that, your company starts with five million in stock. If you have at least three million in cash at the time of reset, you get to buy sixty percent of the company right at the start. The rest of the shares are offered to the market, and you have to pay the fifteen percent stock offering fee, so how much cash your company gets varies a little depending on how much cash you have at reset.
If you have the three mil, you only have to pay fifteen percent on the other two mil, so you are out about three hundred thousand.
If you have less than three mil, you will be out a bit more, the first time you restart you only have one mil, and I cant remember if it gets all invested or only half. So, if its all invested in your company, then you are out fifteen percent times four mil, or six hundred thousand.


Ok so you have 5 million. Then based on the cash you had at reset, you buy shares.

I'm confused though, because at reset, I always have a bunch of cash cause all the stock I have in my company gets cashed out and I get a nice fat check. Is that what you mean by my stock price? If that's the case is it safe to say that as long as you have that 3 million there's no further advantage for having MORE than the 3 million?

:scratches head:
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Re: Divedends

Postby Kirha on Fri Sep 11, 2009 10:32 pm

Alright, so best case scenario you're looking at 4 million & change for startup, if I understand you correctly? And this is based on personal cash you had at end of previous round?


When you retire, your company starts at $5 million in value, represented by a certain number of stocks. If you have enough cash in your player account, you automatically buy 60% of that initial stock. If you happen to still have cash available, you CAN manually buy another 10%. Under that scenario, around 4mil sounds about right.

I'm still kinda fuzzy on how its related to your stock, though. At least in terms of retirement.


Well, when you reach your retirement date, the company effectively goes away. The existing value of stocks that you own gets paid out in cash to your player account, and as mentioned above, some is invested in your new company.

but what I don't understand exactly is if having it split is a good thing or not.


It's generally an excellent thing. It means that the stock value of your company has risen above the $20 per share price Kit has set as the maximum. When that happens, the number of shares doubles, and the value of each is cut in half. If you own 100 stock in company XYZ, and it splits, you now own 200 at half price. As Raymond stated, the actual value of your holdings doesn't change, just the distribution (instead of 100 @ $20 each, you now own 200 @ $10). A stock split in and of itself only means that you've grown beyond that $20 per share limit, but it's a great thing to see; if you see it repeatedly, you are likely doing an excellent job. =) (Or that I'm in a bidding war with Andy, but that's a separate discussion :shakes fist:)

I'm confused though, because at reset, I always have a bunch of cash cause all the stock I have in my company gets cashed out and I get a nice fat check. Is that what you mean by my stock price? If that's the case is it safe to say that as long as you have that 3 million there's no further advantage for having MORE than the 3 million?


Again, when you reset (or retire, same thing), your existing shares are cashed out. That nice fat check you get represents each share you owned in the company times the value at reset. So if you owned 1,000,000 shares and the value of each share at reset was $3, you now have 3 million.

As for whether there is value in having MORE than 3 million, certainly there is. You invest that cash in other companies in the same way you invest in your own. Since no player can own more than 70% of any company, when you reach that point, excess player cash can be invest in others. Just like the value of your company rises as you sell products and succeed, so do others. You can invest your cash in their companies and as they succeed, the value of the shares increases, growing your net worth. I have, at times, made more money from my investments in other companies than in my own. You can also put that extra cash into bonds; they offer a consistent and guaranteed return, but generally don't pay nearly as much as investing in stocks.
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Re: Divedends

Postby Shimizu on Sat Sep 12, 2009 12:20 pm

Alright, thank you!
Seems I've blundered into doing it right by just watching how the game reacts to things I've done, but not really understanding 'why' just seeing what made more moneys appear and kept doing it ;P Thank you for the detailed explanation, that helps quite a bit actually.

Though it is a little frustrating to see, every turn, 18 messages telling me shares sold, hehe. Seems every turn I'm having to go re-buy all my holdings. But looks like when the force buy happens I get some kickback from it, so ;) What I would like to see though, is that when someone (shakes-fist!) has cleaned out my entire portfolio every turn, that all the companies I previously had investments in can stay in my stock list and just show me that I have 0 shares. (Or maybe companies that I check a box saying 'keep in my list') It often times takes me quite a while (on slow internet work connection) to go through the stock list and find everyone again - been keeping a list in notepad for now but checkboxes be better. ;P
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Re: Divedends

Postby Kirha on Sat Sep 12, 2009 3:53 pm

I'm in the same boat. I've learned almost everything via trial and error, and I'd never heard of P/E until it was implemented here. =P

As far as getting your portfolio cleaned out, I know, it's sometimes frustrating. It does help to know that whoever bought them that way paid an extra 5%, which you do get, for the privilege of buying them.

I like the idea of "watching" certain stocks, whether you own them or not to make it easier to figure out where your money has been invested and to provide a simpler way to buy back shares. I suspect that would be a simple enough addition. I'm going to post that suggestion in the feature request thread here > http://thecapitalistgame.com/Forum/viewtopic.php?f=2&t=92&start=30
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Re: Divedends

Postby Morpheus on Mon Sep 21, 2009 7:01 pm

on a side note something that on one side doesn't belong to dividends, on the other side its affected by them, or more precisely the stock price.


i'm sure everyone has issued stock in the game as it became available to him/her.


1) You issue the new, additional shares at your current price per share => higher dividends means higher price per share means more money from issuing stock.


2) You issue 50% of your actual share number.

E.g. your company has 1 million shares in total. you will issue 500 thousand shares.

So if you have a high dividend over a couple of months it may cause the share price to rise over 20$ and lead to a 2 for 1 split (=number of new shares equal in worth to the number of old shares).

E.g. your company has a total of 1 mio shares and the dividend(or someone buying like crazy) caused the split. => 2 mio shares.

if you issue new stock now, you will sell 1 mio new shares instead of 500k you would have sold without the split. which means your company will get roughly two times the money to work with.

So a dividend might also help your company to get more money in the same time frame.


PS: Porsche had a bad time during the 80's and the beginning of the 90's. Then the now late CEO Wiedeking took over 1993 and managed to save the company and then increase its worth.

The worth grew from 300 mio Euros in 1993 to 25 billion euros in 2007; this made numerous splits necessary, the biggest one of 10 for 1.
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Re: Divedends

Postby Raymond on Thu Sep 24, 2009 3:51 pm

The amount you get for a new share issue is going to be somewhere up to 50% of your current net value, minus the 15% fee.
I think everyone offers the maximum amount allowed, there is always something you can buy or upgrade to improve your profits, it seems.

Divedends increase the value of your stock. Although the market will drive your stock price up and down some, now that there are so many players with so much money to spend, the attractiveness of your stock to your fellow gamers is even more likely to drive your stock price up than the market is.

If I know the market is going to drive the price up even higher, I am likely to buy more shares of a company. When it looks like the price is going to drop on the next turn, I am less likely to buy shares, and sometimes will sell them if the stock appears to be dropping rapidly.

The first thing I check is the P/E, because if it is low(under five, or so) then I know that the stock is going to be rising in value and a great investment.
When the P/E is between five and ten, I look to see if other things are going to help the stock price rise, and consider buying the stock based on several things.


Porsche is an interesting case, being a luxury good, it did well during the boom economy, both the tech stock boom of the mid to late nineties and the real estate boom that followed. I understand that they were in negotiations to buy Volkswagon (one of the european car makers, I think it was volkswagon) at one point. Then the economy tanked, and they are in some trouble now. I believe that Volkswagon ended up buying them, in the end.
When you have a high paying job and want to show it off, buying an expensive car like a Porsche sounds like a good idea. When you are barely making payments for that expensive house/car/boat etc. and are trying to make ends meet, the luxury items like performance cars, yachts, and such tend to be amoung the first to get dropped.
Maybe the game can eventually include items that are more economy dependent at some point, like if we ever get an automotive production lines option, maybe have three different lines, a luxury car line that is heavily dependent on the economy, a family car line that is only somewhat, and a economy car line that isnt as profitable but has a nearly constant demand, mostly untouched by economic fluctuations.
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