General Question

mtalaguza's avatar

Why share holder prefer company that pay higher dividend?

Asked by mtalaguza (1points) October 17th, 2010

Explain why share holder prefer companies that pay higher dividends

Observing members: 0 Composing members: 0

2 Answers

zenvelo's avatar

people are willing to pay more for shares that represent a stream of higher payments (dividends) than in a company that does not pay dividends or pays a lower dividend. Buying shares one expects to either have the share value to increase or to have dividends paid, or a combination of both.

Once a company matures and generates more cash than needed for reinvestment, the owners (shareholders) want some return on their investment. Dividends are the way shareholders get money out of the company while retaining ownership.

LuckyGuy's avatar

It depends upon the investment strategy of the shareholder. In general if you are older, have amassed some wealth, and cannot afford risk, you pick a stable stock that gives good dividends. The stock price will remain relatively constant but the dividends should be higher than what you would get at a bank.
If you are young and can afford to take chances in the hopes of making big gains, a company that does not give dividends might be the better choice. You are hoping to pick a stock whose price will jump.
Remember you can lose your money in the stock market.

Disclaimer: Your mileage may vary.

Answer this question

Login

or

Join

to answer.

This question is in the General Section. Responses must be helpful and on-topic.

Your answer will be saved while you login or join.

Have a question? Ask Fluther!

What do you know more about?
or
Knowledge Networking @ Fluther