pay dividends to shareholders?

Question

Why is it important for corporate managers to pay shareholders a reasonable dividend?

Answer 1

Offer them an incentive to keep the stock or reinvest in it. If you don't have dividends, then in order for people to make money off of their shares, they have to sell those shares, which takes principle money out of the company.

It is cheaper for the company and fosters better investments into the company to give out a small dividend than risk shareholders selling off medium to large amounts of stock.

Answer 2

Ok, I've done enough home work this week.!! A company has basically two types of shareholder, prefernce and ordinary. Preference get a dividend every year at a set a rate and it may be deferred, but any non-payment has to go as a creditor (debt to the comapany) and corrected. Ordinary shareholders are not automatically given dividends. It depends on the profits of the company, and what they receive is variable. The only other loosley termed holder is a debenture holder who get fixed rate no matter what. Preference shareholders after debenture holders are paid before ordinary shareholders.

Answer 3

People buy stocks for either value (a stable company) or growth (the next big thing).

The growth stocks inticement is that the value of the stocks will grow as the company becames larger and worth more (if stocks are worth less than the physical company, those stocks are deemed undervalued by investors).

But there is very little to encourage people to a company that has already grown and maybe even falling a little. To encourage people to own the stock, the company offers dividends which added to any growth can be enough enticement for somebody to hold a stock (5% annual stock rise +3% dividend is an 8% gain fo the stock holder). Since many corporate managers are given stocks instead of cash, this enticement can keep the price of the stock up which gives the corporate manager more wealth than when the stock is dropping from lack of interest.

Answer 4

the company should be obligated to pay the dividends to the shareholders... unless they are reinvesting that money back into the company... but otherwise... the shareholders need to paid since they are "owner's" of the company.

Answer 5

Because shareholders own a part of the company and are entitled to share in the profits...

Answer 6

To keep the shareholders with the same stock.