Dividends are after-tax corporate income that companies pass on to thei🌳r shareholders. They can be in the form of cash payments, shares of stock, or other property.

Dividends may be issued at a frequency chosen by a company, although many compa🧸nies pay dividends quarterly and in amounts that increase over time.

There are a number of r♚easons why a corporation may choose to pay shareholders dividends, and several other reasons why it might prefer to reinvest all 🅠of its earnings back into the company.

Why Some Companies Issue Dividends

Here's why issuing 澳洲幸运5官方开奖结果体彩网:dividends can be a good idea for a mature company with sta🦩ble earnings that doesn't need to reinvest as much in itself:

• Many investors like the 澳洲幸运5官方开奖结果体彩网:steady income associated with dividends, so they will be more likely to buy that company's stock.
• Investors also see a dividend payment as a sign of a company's financial strength and management's positive expectations for future earnings, which again makes the stock more attractive. Greater demand for a company's stock will increase its price.
• Increasing dividend amounts from companies with a history of continuous dividend payments are also highly appealing to investors.

Examples of companies that pay dividends include Apple (AAPL), Coca-Cola (KO), McDonald's (MCD), Merck (MRK), Microsoft (MSFT), Occidental Petroleum (OXY), Wells Fargo (WFC), and Verizon (VZ).

Why Some Companies Do Not Issue Dividends

On the other hand, some companies decide that the money they've earned is needed elsewhere:

• Young, fast-growing companies typically won't make dividend payments. That's because it's fiscally shrewder to reinvest the cash back into operations during pivotal growth stages.
• Even well-established companies might decide to reinvest their earnings to fund new initiatives, acquire other companies, or pay down debt. All of these activities tend to spike share prices.
• Companies often reinvest earnings in lieu of making dividend payments to avoid the potentially high costs associated with issuing new stock.

In addition, the choice not to pay dividends may be more benefic𝔉ial to investors, from a tax perspective:

Non-qualified (ordinary) dividends are taxable to investors as ordinary income. This means that an investor's tax rate on dividends is the same as their 澳洲幸运5官方开奖结果体彩网:marginal tax rate which can be as high as 37%.

澳洲幸运5官方开奖结果体彩网:Qualified dividends are taxed at the long-term capital gains rates, either 0%, 15%, or 20%. What you pay depends on your marginal income tax bracket. (Take a look at the table in the next section to determine the rat💟e that might apply.)

Long-Term𒊎 Capital Gains Tax Rates on Qualified Dividends

The table below shows the maximum amounts of income that determine the long-term 澳洲幸运5官方开奖结果体彩网:capital gains tax rate that recipients of qualified dividends would pay, as of tax years 2024 and 2025. Income above the maximum amount for the 15% rate for each filing status would result in the 20% rate.

The Bottom Line

When a company pays dividends, it returns some of its profits directly to shareholders, sending a signal to the market of s🥀table and reliable operations.

Newer companies, or those in the technology space, often opt instead to redirect profits back into the company for growth and expansion, so they do not pay dividends. Rather, this 澳洲幸运5官方开奖结果体彩网:reinvestment of retained earnings is often reflected in a rising share price and capital gains⛎ for investors.