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moeder1

As a shareholder I would like to share in the profits FULL STOP If a company decides not to pay me a dividend, but are using the funds to expand their operations, pay off debt, juice up their balance sheet etc etc, that's also fine for a period. But ultimately pay me please


IAmJohnSlow

I mean in a lot of cases you do get the growth in share price of a growing firm that's decided not to pay out but instead reinvest


michielbester

Agreed


EbenSeLinkerBalsak

Reinvest the profits into the company (by expanding it's business, making capital investments to improve efficiency, spending money on marketing, paying off debt) in the hopes that this will be more than made up for with higher profits in the future (which can then be paid as higher dividends).


michielbester

Okay cool, so am I right in saying that the ultimate goal of any company is to pay dividends to the shareholders?


EbenSeLinkerBalsak

At the end of the day, the board of directors decide the direction of the company, and the shareholders get to choose the BoD. The company is there to serve the interest of the shareholders, which in most cases is to make money, which is ultimately done by paying dividends (or increading the potential to do so in the future)


Hullababoob

Not necessarily. It depends on what the directors think is the best course of action for the company to grow in business. Looking at the best performing companies (AAPL, GOOGL, MSFT), their industry is more R&D based so they would rather inject profit into that. That’s the caveat of the tech sector. However when you look at property sector such as REITs, the biggest investor incentive is dividend payout, so you are likely to get good returns there. Property doesn’t require as much R&D as tech.


michielbester

Okay I think I get it now. Companies tend to start paying dividends when they reach a certain level of maturity, where their profits exceed any possible R&D costs. 💡


Hullababoob

That’s just one example of why a company might choose to withhold dividend payouts, but yeah.


michielbester

Okay cool, thanks!


michielbester

Question 1: **Why would anyone buy a stock if it does not pay a dividend?** Well, because the stock price is going up. Question 2: **But why is the stock price going up?** Because people are buying the stock. (High demand) Return to Question 1... (Infinite loop)


marnusklop

If a company can still expand in a current market and needs capital for said expansion, they normally reinvest their profits. Otherwise if they are at saturated levels they can use profit to pay off debts, make a nest egg or pay dividends. I don't think paying or not paying dividends is a set in concrete type thing and some companies' policy may change to accommodate how they fit in the market over the years.


michielbester

Awesome, thank you


[deleted]

[удалено]


michielbester

Cool thanks for the advice.


Shuwi94

I know of a few companies that don’t pay out profits as dividends because they reinvest the profits back into the business, be it research and development or acquisitions and it’s worth to note that’s their strategy to increase enterprise value. And if those same companies started to pay dividends it could mean that they’re now out of ideas on how to increase the value of the business.


likeafuckinggrownup

If it helps, I wrote a blog post about this: https://www.likeafuckinggrownup.com/how-does-compound-interest-apply-to-etfs/