While many investors seek the regular income provided by dividends, a substantial portion of NYSE and NASDAQ companies don’t offer them. Understanding why investors still flock to these non-dividend stocks requires consideration of various factors:

1. Growth Potential: Many non-dividend companies are often in high-growth sectors like technology, healthcare, or biotech. Investors are willing to forego immediate income in exchange for potentially significant capital appreciation as the company’s share price climbs. This is particularly attractive for long-term investors looking for substantial returns over time.
2. Reinvestment for Expansion: Companies that retain their profits instead of paying dividends often reinvest them in research and development, marketing, or acquisitions. This can fuel faster growth and lead to higher future stock prices, ultimately benefiting shareholders.
3. Tax Advantages: In some cases, investors may prefer non-dividend stocks due to tax implications. Reinvested profits are not taxed until the shares are sold, potentially deferring tax liabilities. Conversely, received dividends are typically taxed immediately.
4. Valuation and Market Conditions: In a low-interest-rate environment, non-dividend stocks become more appealing as alternative investments like bonds offer meager returns. Additionally, if a company’s valuation is deemed attractive based on future growth prospects, even without dividends, investors may opt for capital appreciation potential.
5. Investor Preferences: Not all investors prioritize immediate income. Some may focus on capital growth or total return (dividends + share price appreciation) over regular payouts. They may also have shorter investment horizons where capital appreciation takes precedence.

Sensitivity vs. Scenario Analysis:

Both sensitivity and scenario analysis assess potential outcomes from changing variables, but they differ in their scope and approach:

Sensitivity Analysis:

• Focuses on single variables: This method systematically tests how a specific variable (e.g., interest rate, price point) affects a chosen outcome (e.g., profit, market share).
• Quantitative approach: Uses formulas or models to isolate the impact of changing the chosen variable on the relevant metric.
• Provides range of outcomes: Shows how the outcome changes within a predefined range for the single variable.

Scenario Analysis:

• Considers multiple variables: This method explores the consequences of various economic, market, or other external factors playing out in different combinations.
• Qualitative and quantitative approAach: Utilizes simulations, models, and expert judgment to create plausible scenarios and assess their potential impact.
• Provides broader picture: Explores multiple possible futures based on several interacting variables, offering a richer understanding of potential risks and opportunities.

In summary, while both methods help anticipate outcomes based on changing factors, sensitivity analysis focuses on specific variable impacts, while scenario analysis takes a broader, multi-variable approach, offering a more holistic view of potential future trajectories.