Still, there was one clear and strong sign of a bubble before it collapsed: most public dot-coms gave zero dividends, or actually a tiny symbolic sum close to zero. That was a signal for any smart investor to make money now and run away.
More to the point, most public dot-coms had zero earnings, which is even more of a signal for the smart investor to take the money and run. Over the long run, stock prices track earnings. Zero earnings = zero stock price.
Not exactly. Dividends is what attracts investors (well, real and smart investors), while stock prices is a measure of people's desire to have shares, as well as their sympathy towards that company.
In other words, stock price is a matter of auction, while dividends is a better indicator of whether your company can make money or not.
Dividends don't mean that much: Microsoft in its dominant years (when they had 40%-plus margins and were raking in the cash) never paid a dividend (they did so only recently).
Growth companies do not pay dividends, as a rule. The fact that these companies were having trouble getting anywhere near profits -- that was indeed a real problem. (Also, the fact that they were public at all was a real problem for them, since public investors want profits sooner than later.)
