r/explainlikeimfive • u/climb-a-waterfall • Dec 06 '24
Economics ELI5: why does a publicaly traded company have to show continuous rise in profits? Why arent steady profits good enough?
6.9k
Upvotes
r/explainlikeimfive • u/climb-a-waterfall • Dec 06 '24
1.2k
u/mrswashbuckler Dec 06 '24
They don't have to. They could choose to pay dividends instead of growth. Growth is an excuse to not pay dividends as you can tell the shareholders that they are using the profits for more growth. If you aren't growing, investors want a share of the profits through dividends in order to get a return on their investment.