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Why are there companies that do not pay dividends?

As a general rule, investors give more value to companies with strong dividend distributions, because they prefer a certain profitability, at the moment, than a possible future and uncertain surplus value. So why are there companies that decide not to distribute dividends? It may be due to different reasons, its size, investment opportunities, sector in which it operates.

Fundamentally, the fact that a company does not distribute dividends is due to the fact that it needs resources to develop its projects. If it did so through capital increases, it would imply additional expenses, which would make them less profitable.

You do not distribute dividends, how will this affect the value of the company?

This will depend mainly on what is done with the retained benefit, if the company wants to increase its long-term value, it must develop investment projects, profitable, with positive NPV (NPV). Obtaining higher profitability than the average investor could obtain in the market.

It will also depend on the sector, if it is a growing sector, the shareholders expect capital gains because they trust on the future growth of the company, through correct investment decisions, therefore an increase in the distribution of dividends would be considered a negative aspect when evaluating the company.

The best example of a current company with a reinvestment policy that adds value to the company would be Berkshire Hathaway, led by Warren Buffett, which has grown 19.9% over the last 40 years, thanks to good investment decisions. The same example would be the case of Microsoft, or closer to Inditex, which, despite being one of the companies with the lowest dividend yield, has obtained an average profitability in recent years much higher than the PSI 20.

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When will we choose companies that do not distribute dividends?

This decision will be determined by three factors, the time horizon, the amount available for investment and, as already explained, they are well managed, that is, they get positive NPV from their investments.
If the investment is made in the short term, it is possible that the capital gains obtained as a result of this reinvestment will not be received and, therefore, we prefer to obtain the dividend ensuring this profitability. If it is long-term, the increase would occur and could be more profitable.

As of 2015, after the tax reform and the loss of the 1,500 euro exemption on dividend distribution, both small and large investors would probably prefer not to receive dividends, for which we must pay taxes at the time, and pay them in the amortization time when we obtained the expected increase in assets.

And finally, we will choose companies that do not distribute dividends, as long as the investments they make with retained profits add value, we trust the sector and, in its management team, often this part goes unnoticed, but that’s what the company depends on, the part that makes the decisions and, therefore, on which the course of that depends.

What is the origin of the New York Stock Exchange? (Wall Street)

Wall Street, since the 20th century, has become the world center of financial markets around the world. This street has been the subject of books, series, films; it has made millionaires to humiliate people and, in turn, has seen the bankruptcy of great American fortunes and companies.
In its little more than 700 meters it concentrates more wealth than many countries in the rest of the planet.

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What are the origins of Wall Street?

Wall Street is a street in Lower Manhattan, in the populous city of New York. The name of the street originates in the 17th century, long before the Thirteen Colony War, when the Dutch settlers built a wall there in 1652 to prevent an attack by the Indians, the English. This wall was demolished by the English in 1699.
It is said that in the late 18th century there was a tree where financial intermediaries and speculators traded informally.
In 1920, it suffered an attack by anarchists who killed more than 40 people against the former headquarters of JP Morgan & Co.
Today it has the New York Stock Exchange, the Federal Hall (where George Washington was named president), as well as the Museum of American Finance .