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Are there any instances in which companies should not pay dividends? How do dividends impact
the value of a share of stock?
Solution
Among those are high-growth companies which choose not to pay dividends for the following
reasons:
In the United States, dividends are taxed at a higher rate than capital gains, so a tax-minded
shareholder would most likely prefer not to receive dividends instead of capital gains.
For Exmaple, Apple most likely caters to these stockholders and keeps earnings to finance
further growth and continue to be a high growth technology firm.
If the company will not pay dividend they have huge amount of cash on it's banlance sheet.

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  • 1. Are there any instances in which companies should not pay dividends? How do dividends impact the value of a share of stock? Solution Among those are high-growth companies which choose not to pay dividends for the following reasons: In the United States, dividends are taxed at a higher rate than capital gains, so a tax-minded shareholder would most likely prefer not to receive dividends instead of capital gains. For Exmaple, Apple most likely caters to these stockholders and keeps earnings to finance further growth and continue to be a high growth technology firm. If the company will not pay dividend they have huge amount of cash on it's banlance sheet.