Question

Are public companies required to pay out dividends? Why do they? What companies do not typically pay out dividends and why? What types of investors are attracted to these companies? Are there certain market sectors where companies tend to pay higher dividends? Why?

Answer 1

A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits.when a corporation earns a profit or surplus, the corporation is able to re-invest the profit in the business (called retained earnings) and pay a proportion of the profit as a dividend to shareholders. Distribution to shareholders may be in cash (usually a deposit into a bank account) or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or share repurchase.

A dividend is allocated as a fixed amount per share with shareholders receiving a dividend in proportion to their shareholding. For the joint-stock company, paying dividends is not an expense; rather, it is the division of after-tax profits among shareholders. Retained earnings (profits that have not been distributed as dividends) are shown in the shareholders' equity section on the company's balance sheet – the same as its issued share capital. Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from the fixed schedule dividends. Cooperatives, on the other hand, allocate dividends according to members' activity, so their dividends are often considered to be a pre-tax expense.

S&P 500 companies pay dividends to shareholders in on time with high dividend per share.

Investors who want to invest for the high secured will invest in the companies.

R&D , there depends upon the risk of the development of the company will pay higher dividends because of higher risk.