Question about dividends and giant companies

Question

Before asking any questions I'd like to say that I'm not an economist, investor, entrepreneur etc. I just want to know how the world works.

My first question is why would giant companies (Apple, Google, Samsung...) issue dividends?As far as I know only small and medium companies issue them (or at least should) to attract investors, but companies that don't need investments don't have a reason to waste their money.

Second question - why are Google's stocks so expensive and they don't even issue dividends (and they probably don't have a reason to)?

Answer 1

Dividends are a way of distributing profits from operating a business to the business owners. Why would you call it "wasting money" is beyond me.

Decisions about dividend distribution are made by the company based on its net revenue and the needs of future capital. In some jurisdictions (the US, for example), the tax policy discourages companies from accumulating too much earnings without distributing dividends, unless they have a compelling reason to do so.

Stock price is determined by the market. The price of a stock is neither expensive nor cheap on its own, you need to look at the underlying company and the share of it that the stock represents. In case of Google, according to some analysts, the price is actually quite cheap. The analyst consensus puts the target price for the next 12 months at $921 (vs. current $701).

Answer 2

I see a false assumption that you are making.

(Almost always) When you buy stock the cash you spend does not go to the company. Instead it goes to someone else who is selling their shares. The exception to this is when you buy shares in an IPO.

Those of us who have saved all our lives for retirement want income producing investments once we retire. (Hopefully) We have saved up quite a bit of money. To have us purchase their stock companies have to offer us dividends.