Offer your thoughts or opinion on the input financial query or topic using your financial background.

Why do people always talk about stocks that pay high dividends?
The upvoted answers fail to note that dividends are the only benefit that investors collectively receive from the companies they invest in. If you purchase a share for $100, and then later sell it for $150, you should note that there is always someone that purchases the same share for $150. So, you get $150 immediately, but somebody else has to pay $150 immediately. So, investors collectively did not receive any money from the transaction. (Yes, share repurchase can be used instead of dividends, but it can be considered really another form of paying dividends.) The fair value of a stock is the discounted value of all future dividends the stock pays. It is so simple! This shows why dividends are important. Somebody might argue that many successful companies like Berkshire Hathaway do not pay dividend. Yes, it is true that they don't pay dividend now but they will eventually have to start paying dividend. If they reinvest potential dividends continuously, they will run out of things to invest in after several hundred years has passed. So, even in this case the value of the stock is still the discounted value of all future dividends. The only difference is that the dividends are not paid now; the companies will start to pay the dividends later when they run out of things to invest in. It is true that in theory a stock could pay an unsustainable amount of dividend that requires financing it with debt. This is obviously not a good solution. If you see a company that pays dividend while at the same time obtaining more cash from taking more debt or from share issues, think twice whether you want to invest in such a company. What you need to do to valuate companies fairly is to estimate the amount of dividend that can sustain the expected growth rate. It is typically about 60% of the earnings, because a part of the earnings needs to be invested in future growth, but the exact figure may vary depending on the company. Furthermore, to valuate a company, you need the expected growth rate of dividends and the discount rate. You simply discount all future dividends, correcting them up by the expected dividend growth rate and correcting them down by the discount rate.