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Chapter 6. Stocks > Investing in Growth
6.2. Investing in Growth
When a company's earnings increase over time, the company becomes more valuable. It owns more assets; it has more money to plow back into the company to produce additional growth; shareholders' equity in the company is higher; and for a dividend-paying company, the dividend usually increases, too. Investors are willing to pay more to own a more valuable company, so the price of the company's stock goes up.
Companies can grow sales and earnings several ways:
