Do all stocks pay dividends?
No, not all stocks pay dividends. Usually companies with a strong cash flow and who has a controlled capital allocation offers dividend. While new companies that make acquisitions, capital expenditure, and research and development don’t pay dividends.
Shareholders who hold stocks for a long term are benefited from dividends which is issued by the company to all their shareholders on either interim or yearly basis.
Investors or shareholders call these dividend paying shares “dividend stocks” and shares that doesn’t pay dividend is known as “growth stocks”.
Read the below comparison table to understand them better.
| Dividend Stocks | Growth Stocks |
|---|---|
| Dividend stocks have a strong cash flow from operations and well disciplined capital allocation. | Growth stocks invest every penny in the growth: acquisitions, capital expenditures, and research and development. |
| Dividend stocks company has a priority of returning cash to shareholders. | Growth stock company has a priority of maximum investing for growth. |
| Only an established company can afford to pay the dividend to their shareholders. | Small and new company can not afford to pay dividends unless they ran out of ideas. |
| Dividend stocks are less risky. | Growth stocks are risky. |
In conclusion – research before you invest in any company’s share.
