Can a company stop paying dividends?
Yes. Companies increase, decrease, start paying and stop paying dividends when they think it appropriate.  If a company has been going through some problems and makes a loss, or even a large decrease in profits, they can choose to stop paying dividends until things improve. Many companies did this during the Global Financial Crisis of 2007-08. Dividends are supposed to be paid from company profits (in the current or previous financial years), there are nuances around what profits mean from country to country, but the link is the UK definition from the HMRC. Profits from previous financial years are commonly called retained earnings. There are a few items around this
As far as I read in many articles, all earnings (capital gains and   dividends) from Canadian stocks will be always tax-free. Right?   There's no withholding tax, ie. a $100 dividend means you get $100.  There's no withholding for capital gains in shares for anybody.  You will still have to pay taxes on the amounts, but that's only due at tax time and it could be very minor (or even a refund) for eligible Canadian dividends.  That's because the company has already paid tax on those dividends. In contrast, holding U.S. or any foreign stock that yields dividends   in a TFSA will pay 15% withholding tax and it is not recoverable. Correct, but the 15% is a special rate for regular shares and you need to fill out a W8-BEN.  Your broker will probably make sure you have every few years. But if you hold the same stock in a non-registered account, this 15%   withholding tax can be used as a foreign tax credit? Is this true or   not or what are the considerations? That's true but reduces your Canadian tax payable, it's not refundable, so you have to have some tax to subtract it from. Another consideration is foreign dividends are included 100% in income no mater what the character is.  That means you pay tax at your highest rate always if not held in a tax sheltered account. Canadian dividends that are in a non-registered account will pay   taxes, I presume and I don't know how much, but the amount can be used   also as a tax credit or are unrecoverable? What happens in order to take into account taxes paid by the company is, I read also that if you don't want to pay withholding taxes from foreign > dividends you can hold your stock in a RRSP or RRIF?  You don't have any withholding taxes from US entities to what they consider Canadian retirement accounts.  So TFSAs and RESPs aren't covered. Note that it has to be a US fund like SPY or VTI that trades in the US, and the account has to be RRSP/RRIF.  You can't buy a Canadian listed ETF that holds US stocks and get the same treatment.  This is also only for the US, not foreign like Europe or Asia. Also something like VT (total world) in the US will have withholding taxes from foreign (Europe & Asia mostly) before the money gets to the US.  You can't get that back. Just an honourable mention for the UK, there's no withholding taxes for anybody, and I hear it's on sale. But at some point, if I withdraw the money, who do I need to pay taxes, > U.S. or Canada? Canada. Yep, there just is no free lunch.  So called high dividend stocks are usually from companies that have stable cash flows but relatively little or moderate growth potential. Utility companies come to mind, let's take telecommunications as an example.  Such stocks, usually, indeed are considered more conservative. In a bull market, they won't make high jumps, and in a bear market they shouldn't experience deep falls. I mean, just because the stock market fell by 10%, you're not going to stop using your phone. The stock might suffer a bit but the divided is still yielding you the same. However, fundamental data can have a significant impact. Let's say a recession hits the country of the telco. People might not get the newest iPhone and lock in to an expensive contract anymore, they might use cheaper forms of communication, they might stop paying bills, go bankrupt etc. This will have a severe impact on the company's cash flow and thus hit the stock in a double whammy: One, the dividend is gone. Two, the price will fall even further.  There are basically two scenarios after that. Either the recession is temporary and your stock became a regular growth stock that at some point might bounce back and re-establish at the previous levels. Or the economy has contracted permanently but regained stability in which case you will again have a stock with a high dividend yield but based on a lower price. In conclusion: High dividend stocks make sense in a portfolio. But never consider their income to be safe. Reduce your risk by diversifying. There are two main ways you can make money through shares: through dividends and through capital gains. If the company is performing well and increasing profits year after year, its Net Worth will increase, and if the company continues to beat expectations, then over the long term the share price will follow and increase as well. On the other hand, if the company performs poorly, has a lot of debt and is losing money, it may well stop paying dividends. There will be more demand for stocks that perform well than those that perform badly, thus driving the share price of these stocks up even if they don't pay out dividends. There are many market participants that will use different information to make their decisions to buy or sell a particular stock. Some will be long term buy and hold, others will be day traders, and there is everything in between. Some will use fundamentals to make their decisions, others will use charts and technicals, some will use a combination, and others will use completely different information and methods. These different market participants will create demand at various times, thus driving the share price of good companies up over time. The annual returns from dividends are often between 1% and 6%, and, in some cases, up to 10%. However, annual returns from capital gains can be 20%, 50%, 100% or more. That is the main reason why people still buy stocks that pay no dividends. It is my reason for buying them too. "In financial theory, there is no reason for a difference in investor return to exist between dividend paying and non-dividend paying stocks, except for tax consequences.  This is because in theory, a company can either pay dividends to investors [who can reinvest the funds themselves], or reinvest its capital and earn the same return on that reinvestment [and the shareholder still has the choice to sell a fraction of their holdings, if they prefer to have cash]. That theory may not match reality, because often companies pay or don't pay dividends based on their stage of life.  For example, early-stage mining companies often have no free cashflow to pay dividends [they are capital intensive until the mines are operational]. On the other side, longstanding companies may have no projects left that would be a  good fit for further investment, and so they pay out dividends instead, effectively allowing the shareholder to decide where to reinvest the money. Therefore, saying ""dividend paying""/""growth stock"" can be a proxy for talking about the stage of life + risk and return of a company. Saying dividend paying implies ""long-standing blue chip company with relatively low capital requirements and a stable business"". Likewise ""growth stocks"" [/ non-dividend paying] implies ""new startup company that still needs capital and thus is somewhat unproven, with a chance for good return to match the higher risk"". So in theory, dividend payment policy makes no difference. In practice, it makes a difference for two reasons: (1) You will most likely be taxed differently on selling stock vs receiving dividends [Which one is better for you is a specific question relying on your jurisdiction, your current income, and things like what type of stock / how long you hold it]. For example in Canada, if you earn ~ < $40k, your dividends are very likely to have a preferential tax treatment to selling shares for capital gains [but your province and specific other numbers would influence this]. In the United States, I believe capital gains are usually preferential as long as you hold the shares for a long time [but I am not 100% on this without looking it up]. (2) Dividend policy implies differences in the stage of life / risk level of a stock. This implication is not guaranteed, so be sure you are using other considerations to determine whether this is the case.  Therefore which dividend policy suits you better depends on your tax position and your risk tolerance." Dividends and interest are counted under operations for the purpose of this tweet. This is pretty much entirely a non-story. I'm not sure exactly how they're dividing it up, but it looks like they're only counting stock appreciation as capital gains and counting things revenue from sales (from their subsidiaries as well) under operating income.   This is just from a quick glance over their statement of earning, but that's what it looks like to me. There is certainly an obligation in some cases of a company to distribute profit, either as dividend or a stock buy back. Activist investors frequently push for one or the other when a company is doing well - sometimes to the detriment of future growth, in some eyes - and can even file shareholder lawsuits (saying the company is not doing its duty to its shareholders by simply holding onto cash).  Apple famously held out from doing either for years under Steve Jobs, and only in the last few years started doing both - a large dividend and a share buy-back which increases the value of remaining shares (as EPS then goes up with fewer shares out there).  Carl Icahn for example is one of those investors in Apple's case [and in many cases!] who put significant pressure, particularly when they were sitting on hundreds of billions of dollars. Ultimately, a (for-profit) corporation's board is tasked with maximizing its shareholder's wealth; as such, it can buy back shares, pay dividends, sell the company, liquidate the company, or expand the company, at its discretion, so long as it can justify to its shareholders that it is still attempting to maximize the value of their holdings.  Companies in their growth phase often don't return any money and simply reinvest - but the long-term hope is to either return money in the form of dividends on profits, or the sale of the company. "I don't know why there is so much confusion on such a simple concept. The answer is very simple. A stock must eventually pay dividends or the whole stock market is just a cheap ponzi scheme. A company may temporarily decided to reinvest profits into R&D, company expansion, etc. but obviously if they promised to never pay dividends then you can never participate in the profits of the company and there is simply no intrinsic value to the stock. For all of you saying 'Yeah but the stock price will go up!', please people get a life. The only reason the price goes up is in anticipation of dividend yield otherwise WHY would the price go up?  ""But the company is worth more and the stock is worth more"" A stocks value is not set by the company but by people who buy and sell in the open market.  To think a stock's price can go up even if the company refuses to pay dividends is analogous to : Person A says ""Hey buy these paper clips for $10"". But those paper clips aren't worth that. ""It doesn't matter because some fool down the line will pay $15"". But why would they pay that? ""Because some fool after him will pay $20"" Ha Ha!" "In the case of mutual funds, Net Asset Value (NAV) is the price used to buy and sell shares. NAV is just the value of the underlying assets (which are in turn valued by their underlying holdings and future earnings). So if a fund hands out a billion dollars, it stands to reason their NAV*shares (market cap?) is a billion dollars less. Shareholder's net worth is equal in either scenario, but after the dividend is paid they are more liquid. For people who need investment income to live on, dividends are a cheap way to hold stocks and get regular payments, versus having to sell part of your portfolio every month.  But for people who want to hold their investment in the market for a long long time, dividends only increase the rate at which you have to buy. For mutual funds this isn't a problem: you buy the funds and tell them to reinvest for free. So because of that, it's a prohibited practice to ""sell"" dividends to clients."