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Does the good news conveyed by the announcement of a dividend increase mean that a firm can increase its stock price in the long run simply by paying cash dividends?

A firm's stock price is impacted by much more than if the firm pays dividends to shareholders. Realistically, almost everything affects a stock's price, including the company's financial health, and paying dividends plays a massive part in having a financially sound business. For a company to pay a dividend, it must have enough retained earnings to pay the shareholders while keeping enough liquidity to pay its debts, fund new opportunities, and save for unforeseen challenges. The declaration of dividends is a significant announcement; some investors make investment decisions using dividend payments as a primary factor. However, other company-controlled elements can impact the stock price, such as a public relations issue or research and development break-through. But many things outside the firm's control impact stock prices, toopolitics, war, taxes, inflation, interest rates, supply chain problems, pandemics, industry-specific factors, and declarations from competitors. Even a group of private investors choosing to target the stock for manipulation, as seen in the GameStop stock surge last year, affect stock prices. Reporting for Time Next Advisor, Rebecka Zavaleta describes how a community of investors on Reddit identified a stock (GameStop) and bought it in large quantities, which caused the stock price to climb (2021). At the pinnacle, they sold the stock, making a fortune and causing losses to those who were betting on the stock price fallingthis strategy is called the "short squeeze" (Zavelta, 2021). Dori Zinn, reporting for Time Next Advisor, explains that even technical factors, such as the day and time of the trade or if the firm announced a stock split, can impact the stock price (2021). The complexity and volatility of the stock market should not be underestimated. The most important thing for long-term investors to remember is these blips work themselves out over time, and until you sell, there is no gain or loss, just potential gain or loss (Zavaleta, 2021).

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