Question

• Are there any instances in which companies should not pay dividends?
• How do dividends impact the value of a share of stock?

Answer 1

Yes, when the company feels that the paying off dividends would risk the business finance it would not pay any dividends. The dividends are the earnings of the stockholders on their holdings which the company pays back to the stakeholders or utile the same in the business to further enhance the stock process of the investors in the long term. So here if the business processes see growth of revenue it would be minimum or would have an adverse effect if the paybacks are done to the consumers. For example, the business of Amazon does not pay dividends to the shareholders since the business is based on the concept of growth and continuous growth the company reinvests the same back to the business which effectively further enhance the stock prices.
Hence when the dividends are not paid the amount is reabsorbed by the business which is highlighted in the share price rise. The payment of dividends means the company loses its cash-paying out while it may reinvest the same back to the business to impact the value of the share or stock prices for the business. So once the dividend is added back to the business revenue the stock prices of the investors rise which ultimately shows growth for the business share prices.

Impact of dividends the value of a share of stock

The dividend significantly influence the values of a share of stock The dividends are the primary method of the sharing profits thes stakeholdes and several investors depends on the dividends and this is why the dividned payment influence the payment and dividen payment increases the demand for the stocks and continuously results to a high stock price. The dividends gains the confidence of investors as it convince them that the business is doing good and going well and the attract a reliabl einvestment venture and thus the share price increases in the market due to the high demand amongsr the risk averse individuals.If dividends is issued as additional shares of stocks , the value of those stocks is also deducted. Thus, it can be said that the value of a share of stock depends on the dividens.