Cash Dividends

Usually, high growth companies will never issue dividends, as they would need the cash to fund future products. Not only that, investors and company executives expects that the money would create more value a.k.a more money to you if it kept it to itself. For example, lets say Apple does pay cash dividends, and you put that money in a savings account or in Treasury Bills. You cannot be earning a lot of money through that model. But if Apple kept the dividends, it could reinvest that money, and come up with innovative products that would make the stock price go through the roof.

One of the most important things is that when you get cash dividends, you have to PAY TAX, but you don't have to do that when your stock price goes up. Essentially, you as an investor would be saving money, as you wouldn't be paying any taxes for the capital gains you made through increasing stock price. This is also one of the reasons why people like companies reinvesting their money. Only companies that are in mature markets hand out cash dividends. A company that pays a lot of cash dividends also sends a signal that company's growth prospects aren't that high. If not, the company wouldn't be giving out the money, instead of using it to fund new projects. Investors usually go for dividend stocks if they want a steady stream of revenues.

Microsoft for example, started paying cash dividends from 2003. At first, the dividend was paid annually, and now Microsoft pays quarterly dividends.

I hope this answers any questions you may have. If you guys have any questions, please do not hesitate to ask. You can post your questions using the comment section.

Key:

Cash Dividends
Stock Dividends
Dividends Tax
DRIP - Dividend Reinvestment Plan