facebookWhy do some firms choose not to pay dividends, such as Facebook(FB)? wouldn't people rather have dividends than not? - Seedly

Advertisement

Anonymous

18 Apr 2019

βˆ™

General Investing

Why do some firms choose not to pay dividends, such as Facebook(FB)? wouldn't people rather have dividends than not?

Discussion (3)

What are your thoughts?

There could be a few reasons why companies choose not to pay dividends. It could be that the money is needed to fund expansion/other business needs, or that it is not common practice in the particular industry for companies to distribute dividends, etc.

Some people choose to invest in this kind of companies because they believe that these companies will be able to reinvest the money into their expansion well. In this case, investors will be able to make capital gains rather than gains from dividends.

There could be a few reasons why...

  1. High growth companies that need more cashflow to fund their expansion
  1. Firms that believe that the value of their shares will increase if the firms can redirect the dividends paid out for company growth instead (which will increase share price)
  1. There could also be high potential expense of issuing new stock. To avoid such a risk of raising money this way, they choose to keep their earnings instead of issuing dividends
  1. Tax. But this varies from country to country.

This varies based on a company's individual choice- in this case FB, but I believe there are certain...

Read 1 other comments with a Seedly account

You will also enjoy exclusive benefits and get access to members only features.

Sign up or login with an email here

Write your thoughts

Advertisement