A Plc giving dividend 4 many years, this year wants to invest profit no dividend, does it work for company?

Question

i have to present a topic comparing dividend and investment which one is good for company and for shareholders wealth. althoug past many years company declared dividend to shareholders.

Answer 1

Once in away, any Company may stop distributing dividend, payable to share holders. This increases Company's capital base, so that the amount can be invested back to the development/up gradations. Though the share holder may disappoint in that particular year, actually it is benefit to them in long run. Economically it is recommended, to increase availability of cash. If capital increases, Company become stronger. If EPS increases, naturally the share holder can expect good dividend in coming years and also possibility of getting bonus shares.

Answer 2

...which one is good for the company and shareholders wealth? Can't say one is and the other isn't, depends what the company wants to spend the money on.
Good for company and shareholders: new equipment that is more efficient, or to replace worn out equipment that cost more to maintain. Buying a competitor that is a good value.
Not good for company and shareholders: Spending the money on bonuses for themselves, new equipment just to put nice pictures in the annual report and brag, "we are a modern company," Buying a good value company in an industry the management knows nothing about just to become a "conglomerate" (that is like buying kitty litter thats on sale, even though you have a dog. It won't be used and takes up space). Or moving a factory out of England to a "cheaper" country, without paying any attention to the political backlash (like Henz is trying to do with HP sauce).

Answer 3

It may be the case that this company has not been making enough money and has to "Suspend" the dividend and are just using spin to justify not paying it out.

If It was a company I had stock in, thios would be a red flag and I would sell.

A good company does not suspend dividends as it always keeps some "retained Earnings" for doing extra things in the company.