Strawberry & Cream plc has experienced significant performance gains over previous years and there is no reason to expect any different in the future. The firm has engaged with a potential investor to purchase its shares in the open market. However, the investor has argued that Strawberry & Cream investment is not good value for money because the firm has never paid a dividend and their preference is to choose equities that only pay dividends.

Required:

a) Does the investor’s argument make sense? Explain

b) What argument should be used to convince the investor that Strawberry & Cream equity is the investment for her?

c) What counter-arguments could be made?

Answer rating: 100% (QA)

a The investors argument makes sense only if the preference for dividends is a part of their investm... View the full answer