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Stocks: High Dividends and High Capital Gains

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Please explain: If you were to purchase a stock, would you be looking for one that paid high dividends or high capital gains?

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Solution Summary

This solution discusses considerations when purchasing stocks.

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If you were to purchase a stock, would you be looking for one that paid high dividends or high capital gains?

Firm's Ability to Pay Dividend depends on its funds requirements for growth, shareholders' desire and liquidity. A growth firm should set its dividend rate at a low level (because of its high needs for funds) and move towards its target slowly.

Practical considerations for payment of dividend are:
Financial Need of company, Shareholders Expectations, Closely/Widely Held Company, Constraints on Paying Dividends, Legal Restrictions, ...

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