How Much is Too Much to Pay for a Great Business? | Value Investing News

How Much is Too Much to Pay for a Great Business?

  • So, if you buy a stock that pays you out a 4% dividend and is growing at 6% a year – then, you can make 10% a year for as long as you own the stock without having to sell at a higher P/E, P/B, etc.
  • This is the argument that investors often make when projecting out their own long-term returns in a great, growing business.
  • Well, if you assume both a high growth rate in a stock while you own it and a high price-to-book ratio when you sell it (because, it’ll still be a growth stock) – then, you’re really only making one bet.
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