Getting a dividend feels great when you are getting money just for owning the stock but how does it benefit a business to pay a dividend? There are a few benefits of doing so and this is what I think, I don’t truly know why but I did a lot of research on this topic and I can tell you what I have found. Please know that I am not giving you any stock advice or getting you any financial advice. Do your own research before doing anything that cost money. Companies pay a dividend to their shareholders for a reason and those reasons are some good reasons to pay that dividend but some companies don’t pay a dividend and that’s ok but I am a dividend investor so I only invest into dividend paying stocks.
How does it benefit a business to pay a stock dividend?
Some people think that companies that a pay dividend are just doing so to show that they kind about their shareholders which is true. Companies care about their shareholders and they show that by paying them a dividend payment. Companies allow their shareholder to vote on different things in the company since you are a part owner of that company. I think the number one reason that it benefits a company to pay a dividend, the company really wants you to reinvest that dividend payment back into the company. Think about it, if I give you $5 dollars from owning my stock and you give me that $5 dollars back, then I am not losing money and I am getting more money. I do think that companies hopes that when they pay you a dividend, they hope you will reinvest that payment back to that company. This is why a lot of people push the dividend reinvestment program all the time.
It also benefits the company to pay a dividend so they can keep you buying more shares because everyone loves passive income. Passive income is what everyone wants and getting a dividend just helps push people to keep on investing to get more money. Just think if stocks didn’t pay a dividend? Yes people would still buy stocks but not that this rate. I would not be buying stocks every week without getting a dividend. Stocks are not any good to you unless you sell them or you are getting a dividend. Getting dividends are great and these companies knows this and this is why they pay a dividend.
