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    Companies deciding whether or not to pay dividends

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    Stockholders do not get to decide on whether dividends are paid or not, but they can pressure the company to pay dividends. For example, Microsoft did not pay dividends at all for many years and then were pressured to do so since they had a lot of cash.

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    What considerations are there when a company is deciding whether or not to pay dividends?

    © BrainMass Inc. brainmass.com October 10, 2019, 5:06 am ad1c9bdddf
    https://brainmass.com/business/accounting-for-corporations/companies-deciding-pay-dividends-492403

    Solution Preview

    The main problem is when companies don't pay dividends as a means to avoid taxation, and there is often pressure from their biggest investors to not pay dividends because of this. When a company pays dividends to shareholders, the amounts paid must be reported by the shareholders on their 1040, and the shareholders have to pay income taxes on the dividends received from the company. It is reported as dividend income. Therefore, if the ...

    Solution Summary

    The solution discusses what considerations are there when a company is deciding whether or not to pay dividends.

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