Why do some companies pay dividends and others don't?

Answer 1

Young companies that are growing quickly typically don't pay dividends because they use their profits to grow their business. By contrast, older, more established companies often pay dividends because they are growing more slowly and don't "need" the cash and to reward shareholders by sharing the wealth, so to speak. Paying dividends is often considered a sign of confidence in the business as well and, especially if the dividends are reinvested, can reward shareholders by adding more shares and wealth. Dividends are an added form of "payment" to shareholders, who can benefit from both dividends and stock appreciation. For shareholders of companies that don't pay dividends, they can only earn money on their investment by selling shares that have appreciated. Dividend payments enable shareholders to earn money without having to sell any shares.

Answer 2

Companies that pay dividends typically do so to distribute profits to shareholders as a form of return on their investment. Companies that don't pay dividends may choose to reinvest profits back into the business for growth opportunities or to strengthen the company's financial position. The decision to pay dividends or not is based on various factors including the company's financial performance, growth prospects, and cash flow needs.