Soo... Am I understanding this about the stock market correctly?

[Cats Cats Cats]

Buy low sell high...Thats all you need to know....

Some say buy high sell higher.

[Gaspar]

A third reason would be to use their stock to purchase other companies.

??

[Cats Cats Cats]

??

Stock swap . Dividend, higher stock price, higher buying power.

[nathanm]

Dividend paid makes sure the stock is stable.  In the long run, that IS investment in the company.

Sort of. There are examples of dividend paying companies going Chapter 11 because they didn't feel like they could stop paying dividends.

As an investor, dividends can be nice, in that they compensate for slower growth in stock price. But they have that pesky downside of increasing the company's cost and reducing their flexibility. Nobody likes to say "no dividend this year," as it almost always results in a steep tumble in share price. IMO, companies spend too much time obsessing over share price, actually. It contributes to the short term mentality that helps justify the actions that lead to Enron-like scandals or our most recent financial meltdown.

The problem is that while, over time, the share price should converge to something approximating the actual value of that portion of the company, it clearly does not do any such thing on short time scales. Share prices are often affected quite severely by broader market trends which result in money flooding out of the stock market as a whole or vice versa. The connection with the company's net worth (and even future growth prospects) is tenuous at best. During the 80s, there were a rash of companies selling off major assets (Sears selling the Sears Tower is a good example) because said assets were worth more than their market cap and management didn't want to be taken over and sold off in pieces. It didn't matter that they were still making money, but investors just weren't interested in stodgy old companies with limited growth prospects, even if they were making and likely to continue making a respectable profit each year. They'd rather be in the new hotness.

[Red Arrow]

Buy low sell high...Thats all you need to know....

Good plan if you can do it.  There has to be someone buying high and selling low for that to work.   

[dbacks fan]

In fact, in many cases it's very wise for a company to stay out of the market.  An IPO takes away a significant amount of corporate freedom.

Quick Trip comes to mind.