What are the advantages and disadvantages of dividends?
Dividends are payments that are made to shareholders when the company benefits. These funds are often attractive to individuals who would like income without having to sell their shares. The distribution of such funds allows companies whose expansion has slowed down and maintaining investors. However, there are disadvantages such as negative perception and load on heavy taxes.
One of the main advantages of dividends is that they provide income. When a person owns sharing, his own part in the company. When this company benefits, it is reasonable for the owners to participate in the benefits. This can be done if the company performs dividends. Otherwise, in order to achieve profit, the individual generally has to sell his investment, which represents a one -time opportunity for each share. The investor is generally free to do what he wants, with dividend distribution. Many people decide to reinvest funds that basically allow them to get more shares without risking more money from other sources. When the peopleThey invest, in some way they try to benefit in some way. If the prices of shares are unlikely to increase, investors are unlikely to be interested in investing in the company if they do not pay dividends. This can offer profitable potential associated with the ability to maintain stability in the investor's portfolio.
One of the disadvantages of dividends is that investors can begin to rely on them, but are not guaranteed. Some investors choose their shares with the intention of using dividends as income. There may be a period where one or more companies in the portfolio do not get a person. Companies also have the power to reduce the amount of dividend distribution or to pay them completely.
Although dividends may be attractive to some investors, others may not consider such a positive indication. Many people are not interested in this type of income, but instead prefers a company that expands with new andby innovative means. If you do so, it can often provide potential for significantly higher profits. However, paying dividends can send a message that it has no other ideas for growth.
Other disadvantages associated with dividends are the losses that result from heavy tax burden. These funds are subject to double taxation. First, the Company must pay the income tax for the distribution of funds. Secondly, an investor who accepts funds must pay for income tax.