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If a stock doesn't pay dividends, then why is the stock worth anything?
Stock has value to the buyer even if it does not currently pay dividends, since it is part ownership of the company (and the company's assets). The owners (of which you are now a part) hire managers to make a "dividend policy decision."  If the company can reinvest the profits into a project that would earn more than the "minimum acceptable rate of return," then they should do so. If the company has no internal investment opportunities at or above this desired rate, then the company has an obligation to declare a dividend.  Paying out a dividend returns this portion of profit to the owners, who can then invest their money elsewhere and earn more. For example: The stock market currently has, say, a 5% rate of return. Company A has a $1M profit and can invest it in a project with an expected 10% rate of return, so they should do so. Company B has a $1M profit, but their best internal project only has an expected 2% rate of return.  It is in the owners' best interest to receive their portion of their company's profit as a dividend and re-invest it in other stocks. (Others have pointed out the tax deferrment portion of dividend policy, so I skipped that)