Value Investors

• Paying dividends regularly can attract value investors. These are people who choose which stocks to buy based on how likely it is they will receive dividends rather than how likely the stock is to increase in price so they can sell it at a profit. If a company regularly pays dividends, investors may treat the stock more as a savings plan, with the dividends being equivalent to an interest payment. Attracting investors in this way creates demand for the stock, and that usually raises its price. It may also make it easier to find buyers if the company decided to raise money by issuing additional stock.
  
  

Stability

• The expectation of dividends may persuade investors to hold onto stock even if the price changes. Normally if a price falls suddenly, some investors will sell in panic. On the other hand, if a price rises suddenly, some investors will sell to cash in quickly. If a company is known for paying regular dividends, particularly high ones, those investors may be more comfortable keeping the stock, thus reducing the likelihood that the price will continue to swing.
  
  

Perception

• Paying dividends regularly over several years can help create the impression that the company is stable, the logic being that it must be in good shape to be able to afford paying dividends. This can both attract investors and create a good impression with potential creditors such as banks or suppliers. For this strategy to work best, the dividends must be supported by the actual business performance of the company. It is possible to pay high dividends by using cash reserves as well as actual profits in the relevant period, but some investors are put off by this and consider it unsustainable.
  
  

Personal Income

• Paying dividends is a way for senior executives in the company, particularly those who created and built the company before it went public, to take an income from the business. In some companies, the salaries of the senior figures may be comparatively low given the company's profits, but this can be made up for with dividends if they own a large amount of stock in the company.