3 Reasons Why Some Companies Do Not Pay Dividends

Up to date on September twenty second, 2025 by Bob Ciura

This text is a visitor contribution by Ryan Scribner from Investing Easy.

In terms of investing within the inventory market, you primarily have two forms of buyers on the market.

The primary is a progress investor. That is somebody who’s trying to put their cash behind corporations which are increasing and scaling operations.

In flip, this could translate to progress in income or whole gross sales. Many of those corporations are unprofitable, however that’s the worth you pay for prime innovation. The aim with progress investing is to purchase shares at a low worth and promote them afterward for a revenue.

The second kind is an revenue investor. Such a investor is trying to maintain shares that pay dividends, such because the Dividend Aristocrats.

There are presently 66 Dividend Aristocrats. You’ll be able to obtain an Excel spreadsheet of all 69 Dividend Aristocrats (with monetary metrics that matter reminiscent of dividend yields and price-to-earnings ratios) by clicking the hyperlink beneath:

Disclaimer: Certain Dividend will not be affiliated with S&P International in any method. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Certain Dividend’s personal overview, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s primarily based. Not one of the data on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official data.

For individuals who are usually not acquainted, dividends are a method {that a} properly established and worthwhile firm shares their earnings with shareholders. Most revenue buyers are solely taking a look at corporations that pay dividends when making investments.

The aim isn’t a lot to develop the share worth. As a substitute, it’s to receives a commission whereas holding onto shares by way of dividends. Traders need these quarterly or annual dividend funds for the aim of reinvestment, or revenue for another goal.

Reinvestment permits for compound curiosity, a robust wealth-building financial phenomenon. As such, dividends are a improbable method to earn compound curiosity.

Firms within the progress stage not often pay dividends. Many of those corporations are usually not even worthwhile but. They’re targeted on acquisitions, growth, product growth and all of those different issues that value some huge cash. In consequence, they merely can’t afford to pay a dividend.

Most corporations start paying dividends as a method to entice and reward shareholders. These dividend payers are sometimes corporations that shouldn’t have large progress potential. That’s largely on account of the truth that a whole lot of their progress occurred a few years in the past. They’ve now develop into titan’s of their industries.

You will need to bear in mind, nevertheless, that dividends are by no means assured. An organization can lower or cancel a dividend at any time. Usually talking, corporations wish to proceed paying dividends and proceed rising them to earn the belief of shareholders.

That is also known as the dividend progress streak. So now we perceive why progress stage corporations don’t pay dividends and why properly established corporations do.

However what about properly established, money flowing corporations that don’t pay a dividend? It’s a unusual but frequent phenomenon. Keep in mind, there isn’t any regulation or requirement on the market that claims an organization has to pay dividends to shareholders, so many corporations don’t!

Listed here are a number of the most well-known, giant corporations that don’t pay dividends…

Be aware: Click on on the hyperlinks beneath to learn evaluation on if these corporations will ever pay a dividend.

So, what offers? All of those corporations talked about might moderately afford to pay a dividend to shareholders, however they don’t pay a penny. And but, the share worth nonetheless climbs. Whereas I don’t have a crystal ball, listed below are a couple of logical the explanation why they don’t pay dividends.

Motive #1 – Reinvesting Income

The primary motive why some corporations don’t pay dividends is as a result of they might somewhat reinvest these earnings again into the enterprise. That is precisely what progress stage corporations do, however some corporations by no means cease!

Contemplate Amazon for instance. Reasonably than paying dividends to shareholders, the administration staff believes they will ship higher worth to shareholders by reinvesting the earnings again into operations. Not solely that, this can be a authorized method for Amazon to keep away from taxes as properly!

This is likely one of the foremost the explanation why corporations like Amazon are so revolutionary. They generate a ship load of money, after which they reinvest that money again into new merchandise, concepts and providers. If corporations like Amazon or Tesla that reinvest money closely have an enormous win, it’s going to finally make the share worth climb greater which brings worth to the shareholders.

Motive #2 – Acquisitions 

One more reason why corporations will maintain off on dividend funds and hoard money is for acquisitions. This occurs when one firm basically purchases one other one, and so they merge beneath one entity. One other frequent prevalence is when an organization will buy an possession stake in one other firm.

Acquisitions are one thing that Warren Buffett could be very well-known for. He’s the chairman and CEO of his firm Berkshire Hathaway, talked about earlier.

Buffett has spoken out in opposition to paying dividends prior to now, stating that cash will be spent higher in different methods. He believes, and has confirmed, that he can ship extra worth for shareholders by way of reinvestment and acquisitions.

Motive #3 – Debt/Monetary Bother 

Right here’s a unique state of affairs to think about. Generally you’ll run into an organization that used to pay a dividend, however now not does. Or, they slash the dividend. The primary motive behind that is monetary hardship.

As talked about earlier, corporations typically wish to proceed paying dividends, as this attracts shareholders and retains them round. Nonetheless, generally you’ll run into an organization that has to chop or get rid of a dividend on account of monetary troubles.

Contemplate Normal Electrical (GE) for instance. For many years, they had been referred to as an amazing inventory for revenue buyers with a really protected dividend. After their unraveling started in 2017, extra unhealthy information adopted. Lastly, in December of 2018 it was introduced that they might slash the dividend to a penny a share.

The explanation behind it’s because paying a excessive dividend at this cut-off date was financially irresponsible. At one cut-off date, the longer term was unsure for GE primarily based on the monetary well being of the corporate.

The easiest way they may convey worth to shareholders was to get the corporate again on monitor. This meant that the cash being spent on a excessive quarterly dividend was higher spent paying down money owed and bailing out the corporate.

Closing Ideas

We are going to at all times have some corporations that pay dividends and a few that don’t. Sometimes, now we have the white elephants like Alphabet, Meta, Berkshire Hathaway and the opposite corporations talked about above that don’t pay dividends regardless of a transparent capability to afford one.

In abstract, the primary motive for not paying a dividend is as a result of these corporations have determined they will higher spend the cash elsewhere, and buyers in these corporations imagine them!

I’ll put it this manner, would you somewhat make investments $1,000,000 or have Jeff Bezos make investments $1,000,000? Most individuals would select Jeff Bezos, primarily based on his monitor file, and that’s the reason they’re snug with investing in Amazon though they don’t pay a dividend.

Different Dividend Lists

The next lists include many extra high-quality dividend shares:

• The Dividend Achievers Listing is comprised of ~400 NASDAQ shares with 10+ years of consecutive dividend will increase.
• The Dividend Kings Listing is much more unique than the Dividend Aristocrats. It’s comprised of 56 shares with 50+ years of consecutive dividend will increase.
• The Excessive Yield Dividend Kings Listing is comprised of the 20 Dividend Kings with the very best present yields.
• The Blue Chip Shares Listing: shares that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
• The Excessive Dividend Shares Listing: shares that enchantment to buyers within the highest yields of 5% or extra.
• The Month-to-month Dividend Shares Listing: shares that pay dividends each month, for 12 dividend funds per yr.
• The Dividend Champions Listing: shares which have elevated their dividends for 25+ consecutive years.
  Be aware: Not all Dividend Champions are Dividend Aristocrats as a result of Dividend Aristocrats have extra necessities like being in The S&P 500.