Anonymous
Anonymous asked in Business & FinanceCorporations · 1 month ago

Where does the dividend (profit) go in companies which do not pay dividends to their shareholders ?

Where does the dividend (profit) go in companies which do not pay dividends to their shareholders ?

Update:

For example: A is the founder and own %50 shares of company X, and B and C own %25 of X and other shares are public.X  has a 100 mil $ profit at the end of the year and it does not pay any dividend to shareholders. Can A move the 100 million $ to his account without any paid to B, C or any other shareholders ?

6 Answers

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  • 5 days ago

    A Corporation that pays no dividends uses the money for the expansion of the business resulting in an increase of the stock's price, at least in theory.

  • 1 month ago

    A sure can. Don't trust A. 

  • 1 month ago

    Either they keep it or they use it to buy shares of other companies, to expand their factories, or for other purposes.

  • Amy
    Lv 7
    1 month ago

    (1) Build more factories, hire more workers, etc.

    (2) Buy up other companies. Companies particularly like to buy their suppliers in order to control the supply chain. It's also a way to expand into other products without starting from scratch (e.g. Apple didn't invent Siri, they bought it).

    (3) Keep cash in the bank, or invest it.

    Both (1) and (2) are attempts to increase your future profits. (3) gives you cash on hand to ride out times when your expenses exceed revenue, or to save up for spending later. Companies that do pay a dividend often keep back some of their profit in good years so they can pay a constant dividend every year.

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  • G
    Lv 5
    1 month ago

    Retained earnings on the balance sheet; Cap-X, M&A and bonuses on P&L.

    A can sell their shares to get cash. If the company is private (3 owners, it's certainly private), there would be a buy-sell agreement between the current and any future owners that defines how and if shares can be bought and sold. If the company added 100 million to retained earnings, the company is worth 100 million more and each share is now valued for sale purposes a proportional amount.

  • Anonymous
    1 month ago

    Earnings, if any, remain with the business to use as they please. Fast growing companies use it to try and fuel their growth.

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