Where can publicly traded profits go but to shareholders via dividends?
"If a company earns $1 Million in net profit (let's say all cash, which is not entirely realistic), it can do one of three things with it: On the balance sheet - profits that have not been distributed show up as ""retained earnings"".  When dividends are paid, Retained Earnings and cash are reduced. None of the other options change the fact that it is still ""profit"" - they all just affect the balance sheet, not the income statement: Note that when a company issues dividends, it reduces its per-share value since cash is leaving the door with nothing in return.   In Apple's case, since a significant amount of its profit was earned in other countries (where it was not taxed by the US), it would pay a significant amount in US corporate tax by bringing it back to the US by investing it or paying dividends. They are betting that at some point, the US will change the rules to make it more favorable to ""repatriate"" the money and reduce their tax significantly." Apart from investing in their own infrastructure, profits can be spent purchasing other companies, (Mergers and Acquisitions) investing in other securities, and frankly whatever they please. The idea here is that publicly traded companies have a fiduciary duty to their shareholders to make as much money as they can with the resources (including cash, but including so much more than that) available to the company. It happens that the majority of huge companies eventually stopped growing and figured out that they weren't good at making money outside their core discipline and started giving the money back through dividends, but that norm has been eroded by tech companies that have figured out how to keep growing and driving up share prices even after they become giants. Shareholders will pressure management to issue dividends if share prices don't keep going up, but until the growth slows down, most investors hang on and don't rock the boat. Where can publicly traded profits go but to shareholders via dividends? They can be retained by the company.
The shareholders can't all re-invest their dividends -- it's not possible. Paying a dividend doesn't issue any new shares, so unless some of the existing shareholders sell their shares instead of re-investing, there aren't any shares available for the shareholders to re-invest in. "As an owner of a share of a business you also ""own"" profits made by the business. But you delegate company management to reinvest those profits, on your behalf, to make even more profits. So your share of the business is a little money-making machine that should grow, without you having to pay taxes on the dividends and without you having to decide where to reinvest your share of the profit." Shares often come associated with a set of rights, such as ability to vote in the outcome of the company. Some shares do not have this right, however. With your ability to vote in the outcome of the company, you could help dictate that the company paid dividends at a point in time. Or many other varieties of outcomes. Also, if there were any liquidity events due to demand of the shares, this is typically at a much higher price than the shares are now when the company is private/closely held. Incorrect.   Dividends are paid after tax, so whether they pay them or not has nothing to do with tax avoidance.  Additionally, dividends have little to no impact on the market cap of a company like amazon.  On top of all of that, amazon does not pay dividends at all, they invest their cash back into themselves to grow. This strategy reduces profit, and the growth drives up their market cap and drives down their cost of capital as a result. "Random question: are there any companies with ""physical,"" ""real,"" or ""in-kind"" dividends?   For clarification, suppose a winery offers a security with a dividend of X bottles of wine deliverable annually for every Y amount of shares owned.   Does such a company or practice exist?" This investment strategy may have tax advantages. In some countries, income received from dividends is taxed as income, whereas profits on share trades are capital gains. If you have already exceeded your tax-free income limit for the year, but not your capital gains tax allowance, it may be preferable to make a dealing profit rather than an investment income. These arrangements are called a bed-and-breakfast. "In the unlikely case that noone finds a way to extract resources from the company and distribute them to shareholders periodically in a way that's de facto equivalent to dividends, any company can be dissolved. The assets of the company would be sold for their market value, the liabilities would have to be settled, and the net result of all this (company cash + sale results - liabilities) would be distributed to shareholders proportionally to their shares. The 'liquidation value' is generally lower than the market value of a company as an ongoing concern that's making business and earning profit, but it does put a floor on it's value - if the stock price is too low, someone can buy enough stock to get control of the company, vote to dissolve it, and make a profit that way; and the mere fact that this can happen props up the stock price. Companies could even be created for a limited time period in the first hand (which has some historical precedent with shareholders of 'trading companies' with lifetime of a single trade voyage). Imagine that there is some company Megacorp2015 where shareholders want to receive $1M of its cash as ""dividends"". They can make appropriate contracts that will form a new company called Megacorp2016 that will take over all the ongoing business and assets except $1M in cash, and then liquidate Megacorp2015 and distribute it's assets (shares of Megacorp2016 and the ""dividend"") among themselves. The main difference from normal dividends is that in this process, you need cooperation from any lenders involved, so if the company has some long-term debts then they would need agreement from those banks in order to pay out ""dividends"". Oh, and everyone would have to pay a bunch more to lawyers simply to do ""dividends"" in this or some other convoluted way." "Some investment trusts have ""zero dividend preference shares"" which deliver all their gains as capital gains rather than income, even if the trust was investing in income yielding stocks. They've rather gone out of fashion after a scandal some years ago (~2000).  Good 2014 article on them here includes the quote  ""Because profits from zero dividend preference shares are taxed as   capital gains, they can be used tax efficiently if you are smart about   how you use your annual capital gains tax allowance.""" "I was just going by [this](http://evonomics.com/amazon-accounting-corporate-profits-rich-peoples-income-invisible-bezos/) source and many like it.  They might not be reffering to _literal_ dividends but increased stock value.  Ultimately, I was responding to that idiot who said ""But a business making no profits to avoid tax is the worst tax planning advice I have ever seen!""..." "Dividend paying stocks are not ""better""  In particular shareholders will get taxed on the distribution while the company can most likely invest the money tax free in their operations.  The shareholder then has the opportunity to decide when to pay the taxes when they sell their shares.   Companies pay dividends for a couple of reasons.... 1.) To signal the strength of the company. 2.) To reward the shareholders (oftentimes the executives of the firm get rather large rewards without having to sell shares they control.) 3.) If they don't have suitable investment opportunities in their field.  IE they don't have anything useful to do with the money." "Baseball cards don't pay dividends. But many profitable companies do just that, and those that don't could, some day. Profits & dividends is where your analogy falls apart.  But let's take it further.  Consider: If baseball cards could somehow yield a regular stream of income just for owning them, then there might be yet another group of people, call them the Daves.  These Daves I know are the kind of people that would like to own baseball cards over the long term just for their income-producing capability.  Daves would seek out the cards with the best chance of producing and growing a reliable income stream.  They wouldn't necessarily care about being able to flip a card at an inflated price to a Bob, but they might take advantage of inflated prices once in a while. Heck, even some of the Steves would enjoy this income while they waited for the eventual capital gain made by selling to a Bob at a higher price.  Plus, the Steves could also sell their cards to Daves, not just Bobs.  Daves would be willing to pay more for a card based on its income stream: how reliable it is, how high it is, how fast it grows, and where it is relative to market interest rates.  A card with a good income stream might even have more value to a Dave than to a Bob, because a Dave doesn't care as much about the popularity of the player. Addendum regarding your comment: I suppose I'm still struggling with the best way to present my   question. I understand that companies differ in this aspect in that   they produce value. But if stockholders cannot simply claim a   percentage of a company's value equal to their share, then the fact   that companies produce value seems irrelevant to the ""Bobs"". You're right – stockholders can't simply claim their percentage of a company's assets. Rather, shareholders vote in a board of directors.  The board of directors can decide whether or not to issue dividends or buy back shares, each of which puts money back in your pocket.  A board could even decide to dissolve the company and distribute the net assets (after paying debts and dissolution costs) to the shareholders – but this is seldom done because there's often more profit in remaining a going concern. I think perhaps what you are getting hung up on is the idea that a small shareholder can't command the company to give net assets in exchange for shares.  Instead, generally speaking, a company runs somewhat like a democracy – but it's each share that gets a vote, not each shareholder. Since you can't redeem your shares back to the company on demand, there exists a secondary market – the stock market – where somebody else is willing to take over your investment based on what they perceive the value of your shares to be – and that market value is often different from the underlying ""book value"" per share." "The profits that the corporation had to earn to be able to pay you ""eligible"" dividends for the dividend tax credit were already taxed, and at a somewhat high corporate rate, in the case of large public companies with big profits. The dividend tax credit, which permits an individual to earn a lot from dividends and not pay any personal income tax, essentially recognizes that the profit making up the dividend was already highly taxed to begin with via corporate income tax.  It aims to eliminate double-taxation. FWIW, if you own and run a small private business in Canada and pay yourself a dividend, such dividends are considered ""non-eligible"", i.e. you don't get as much a benefit from the dividend tax credit, since small business corporate income tax rates are much lower." the biggest issue with a pure physical dividend is the cost of transfer. Cash or stock dividends are decentralized **and** easy to transfer ownership, hence the majority of value can be transferred to the shareholder.   If you were to deliver wine to every shareholder, you would have to deduct the cost of transport from the value of the wine dividend, otherwise it becomes value-reductive to shareholders and they'd be better off keeping the dividend as stock value. "It's actually the other way around.  Distributions in an LLC are usually based on  each member's equity share, although the operating agreement can specify how often such distributions are made.  Shareholders in a corporation can receive dividends, but those are determined by the corporation's board and can vary depending on the class of stock each shareholder owns.  Preferred-class shareholders, who may hold a smaller overall fraction of the company's outstanding shares than the common stock shareholders, may receive disproportionately larger dividends per share than common stock shareholders, which is one of the (many) reasons that preferred stock is a better choice when it is available.  Take, for instance, what Berkshire Class ""A"" shareholders receive in dividends per year compared to Class ""B"" shareholders. Here's a good link from LegalZoom that can explain what you're asking about: Explanation of LLC distributions I hope this helps. Good luck!" Your employer decides what options you have in the 401k. You can talk to your HR about that. There are requirements for diversity of various types of investments, money-market funds is being one of them. That is the investment account equivalent of cash. While it is not really cash but rather short term bonds - the term is generally very short and the risk is very limited. You can't earn much there, and you can't lose much there - so for all intents and purposes you can treat is as a cash-equivalent.