Dividends come out of profits (or sometimes from retained profits). A company that needs a lot of cash for expansion (fast growing) will pay a very small dividend or none at all. Remember the shareholder 'owns' the profit whether it is distributed as dividends or not.
Some institutional funds may only be able to invest in companies that pay dividends (companies probably prefer institutional holders rather than retail clients).
It is a bit of a simplistic question but think about the possible answers yourself. The company makes a profit or loss. The company needs cash flow/working capital. The company has excess to requirements profit. What will it do with spare cash? The shareholder needs to be kept happy as they are a cheap source of finance.
It depends on how well the company is doing and whether it feels it has any spare cash to pay out in dividends. If it's doing badly, or it wants to keep a lot of cash for future expansion, it might pay a small dividend or none at all. If it's doing well, it can thank the shareholders by paying them a nice dividend.
That's one of the risks you take with buying shares - you never can know what the dividend will be or even whether there will be one. Companies don't have to pay dividends.
It's also not entirely a matter of profit. A company could make a profit, but only a paper profit not reflected in actual cash. For instance, it might be owed a lot of money, and that shows up as profit, but it can't pay some of that out as a dividend because it doesn't have the actual cash yet. It might never get the actual cash and have to write off the debt in a future year. "Cash is king" is a good thing for any company or business to remember - if you don't have cash, you can't pay your bills, and usually it's when they can't pay the bills that they go bust. It would be totally foolish to pay cash out as dividends when they need it to pay the bills.
1. Only companies which have shareholders issue a dividend - a smaller company owned by an individual or by a small group of partners may not have shareholders who qualify for a dividend.
2. A dividend is a way of sharing the profits of a company amoung the shareholders who own the company. It is therefore necessary for the company to have made a profit. No profit = no dividend.
3. If a company with shareholders has made a profit they then have to decide how much of the profit should be paid out, and how much used to invest in the growth of the company. If profits are fairly small they may decide to invest it all in the future of the business rather than paying a dividend
The company to pay the dividends to the shareholders for the purpose of to make the interest of the shareholders. The shareholders is the main persons in every organisations. He is expand our business and he to make a profit ,goodwill, financial soundness to the business. So the company to pay the dividend compulsory to the shareholders
Dividends are a portion of the company`s earnings ( which belong to shareholders ) paid at the discretion of the board. Mature companies will pay most of its earnings as a dividend ( as indicated by a low cover ) , while growth companies will retain earnings to cover gearing and growth investment or build reserves i.e.rainy day money.
You can't make dividend payments compulsory - they can only be paid out of distributable profits, so if the company makes a loss...
I think you're confusing these with bonds.
Why do some companies pay dividends and others don't
