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Why do companies pay dividends?

The companies pay dividends for a variety of reasons, though the main motive of the company is to reflect a positive image of the company and maintain investors trust. It is also expected by the shareholders as a bonus for their faith in the company.

If a company declares a high-value dividend, it will indicate that a company is making good profits but also it can indicate that company is not having suitable projects to increase the value of returns. So, it is using the cash to pay the shareholders instead of reinvesting it into projects.

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