Paying out dividends belongs to the easiest way to communicate financial well-being and shareholder value, since they are sending out a powerful message about future prospects and performances. The willingness, and also the ability of companies to pay out steady dividends and maybe even to increase them, provides the shareholder with valuable information about the company's fundamentals.
Wherever you are looking for information regarding dividends, you will find statements about their affection on stockholders. But where is the point for the companies? What drives companies to pay out dividends, and why do some companies do so and some do not?
There is the opinion of some financial analysts that a dividend policy is irrelevant because investors have the ability to create homemade dividends. That can be done by adjusting the personal portfolio to reflect the investor's own preferences. A second argument suggests that little to no dividend payout is more favorable for investors. This can be led back to the fact that the taxes which have to be paid on dividends are higher than these on capital gains. Furthermore, there is the "advantage" of the reinvestment of the funds in the company. Supporters of this policy argue that companies who save money on dividends will invest this and increase the value of the firm as a whole, which consequently will lift the market value of the stock price. Possibilities for using this money in "a more profitable" way are e.g. the undertaking of more projects, the repurchase of the company's own shares, the acquisition of new companies and profitable assets and the reinvesting in financial assets.
In opposition of these two arguments, there is the idea that a high dividend payout is more important for investors bec ...