Dividends and Netflix shares pounded after streaming giant sees drop in subscribers

In every market there are 2 types of stocks – value and growth and then a mixture of the others. If you buy a growth stock, your expectations is the stock price will increase in the short and long run. If you buy a value stock, your expectations is the stock price will increase in the long run and it helps if the company pays dividends along the way. Sometimes the market loves one or the other and then it switches due to other reasons including expected higher interest rates. At the moment, the stock market likes value stocks and in particular companies that make profits. Companies that do not make profits, the market is looking for a reason to sell or send the price down.

In an article by Nicole Spring of the New York Times News Service, one of the many metrics Wall Spring was using to judge Netflix is subscriber growth. When offices were closed down, more people stayed home and watched more TV and often subscribed to a TV and movie channel. Netflix also aired some the best shows on TV, but Wall Street was more interested in subscriber numbers. The company reported the company lost 200,000 subscribers in the quarter. Total subscribers stand at 221.64 million compared with 221.84 in the last quarter. The analysts were expect an increase to 2.5 million. There were practical reasons why subscriber growth was down – a slowdown in the adoption of broadband and smart TVs; password sharing among households; increased competition among other streaming services; and Russia’s invasion of the Ukraine which resulted in Netflix shutting down in Russia or 700,000 subscribers.

Netflix is losing subscribers in the US but is growing outside the US which means the company will be putting more resources in its international production capabilities.

The company will be around for many a year, however as a growth stock, it may not be the best choice anymore. The company has to move towards being valued as a value stock because it did make $1.6 billion in profit on sales of $7.8 billion in first quarter sales an increase of 10% compared with the same period of last year.

Linking to dividend paying stocks, the excitement in the newspaper headlines about stocks refers to the growth stocks, however as a dividend investor you do not want to see excitement in your portfolio. You want to see the companies continuing to produce profits to pay dividends and as the other side sees the tremendous value, pushing up the multiple which means over the long term both the stock prices and dividends raise.

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