Growth and expansion of business

Running head: FINANCE
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Table of Contents
Industries not paying dividend...................................................................................................2
Specific factors used in valuation of stock.................................................................................2
Two publicly traded companies.................................................................................................3
References..................................................................................................................................4

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Industries not paying dividend
Dividends refer to a part of corporate earnings that are given to the shareholders of the
company. Dividends may be provided in different period and payout rates. In many
industries, companies did not pay dividends to their shareholders; instead, the company
reinvest whole amount of earnings in firm to increase the retained earnings portion of
business. Usually, a rapidly growing industry does not pay a dividend as according to them if
amount of profit is reinvested in business, then it will be profitable for the company and can
help in future growth and expansion of business (Baker & Weigand, 2015). Few companies
that comes under S&P 500 companies with no dividend are Amazon.Com Inc., Biogen Inc.
and many more. Developing a firm believe that if dividend is retained in the business, it will
ultimately increase the value of organization.
Specific factors used in valuation of stock
If a company is not paying dividend to its shareholders, the investors investing in
these type of companies will look into earnings of the firm and will try to measure whether
the company would be giving higher returns in future or not. Investors are interested to know
the future projects of company and identify whether specific projects are profitable for
business, then only they will make further investments in the company (Kaźmierska-Jóźwiak,
2015). Investors and lenders have a viewpoint that if dividends are not paid then, the firm
should yield higher returns by rising stock price. Many investors and creditors intends to
invest in companies that reflect an increasing profit in their financial statements and are less
concerned about the dividend. According to them if a firm is making a profit every year then
definitely, it will provide higher returns and investors can earn profits. There are specific
ways by which stocks can be valued if, the company does not pay a dividend, some of them
are as follows: stocks shorting technique can be used, where an investor can use long-term