-2

This question already has an answer here:

Before asking any questions I'd like to say that I'm not an economist, investor, entrepreneur etc. I just want to know how the world works.

My first question is why would giant companies (Apple, Google, Samsung...) issue dividends?As far as I know only small and medium companies issue them (or at least should) to attract investors, but companies that don't need investments don't have a reason to waste their money.

Second question - why are Google's stocks so expensive and they don't even issue dividends (and they probably don't have a reason to)?

marked as duplicate by Dheer, Chris W. Rea, JoeTaxpayer Feb 10 '16 at 13:04

This question has been asked before and already has an answer. If those answers do not fully address your question, please ask a new question.

  • Dividends go to shareholders who are part owners of the business. – Victor Feb 10 '16 at 9:46
  • don't have a reason to waste their money Interesting way to define dividends. companies that don't need investments You have got it other way around for small versus big companies – DumbCoder Feb 10 '16 at 9:50
4

Dividends are a way of distributing profits from operating a business to the business owners. Why would you call it "wasting money" is beyond me.

Decisions about dividend distribution are made by the company based on its net revenue and the needs of future capital. In some jurisdictions (the US, for example), the tax policy discourages companies from accumulating too much earnings without distributing dividends, unless they have a compelling reason to do so.

Stock price is determined by the market. The price of a stock is neither expensive nor cheap on its own, you need to look at the underlying company and the share of it that the stock represents. In case of Google, according to some analysts, the price is actually quite cheap. The analyst consensus puts the target price for the next 12 months at $921 (vs. current $701).

2

I see a false assumption that you are making.

(Almost always) When you buy stock the cash you spend does not go to the company. Instead it goes to someone else who is selling their shares. The exception to this is when you buy shares in an IPO.

Those of us who have saved all our lives for retirement want income producing investments once we retire. (Hopefully) We have saved up quite a bit of money. To have us purchase their stock companies have to offer us dividends.

Not the answer you're looking for? Browse other questions tagged or ask your own question.