Dividends enable investors to receive a part of their return on investment frequently and in a shorter period of time. However, this payment can be made in several ways such as providing additional shares in the company or at least giving them a discount. The non-payable dividends on the other hand allow companies to use this payable amount for the further growth of the company. By assessing the stock shares structure of Nestle, it can be observed that it has dividend-paying stocks as the company paid 58% of its profit as dividends in the last year (Simply Wall St, 2020). However, it is also important to note that since dividends are paid from the company’s earnings, it must have enough earning to save some money to sustain its operations. But in the case of Nestle, the earrings to dividends ratio is healthy.
It is most likely that the company can pay its dividends through both its cash flow and profit as it is the sign that dividend is sustainable which provides investors with a sense of security. Even more, as noted by Simply Wall St (2020), the dividend has been stable for the last ten years which further makes it very attractive for investors and shareholders to buy more stocks. So, based on these facts, I would also purchase a dividend-paying stock. However, purchasing a non-dividend-paying stock is also a promising option because it enables companies to grow faster which will ultimately increase the value of the stocks. So, this is the reason why I would be interested to buy a non-dividend-paying stock.
References
Simply Wall St. (2020). Three Things You Should Check Before Buying Nestlé S.A. (VTX:NESN) For Its Dividend. Simplywall.st. https://simplywall.st/stocks/ch/food-beverage-tobacco/vtx-nesn/nestle-shares/news/three-things-you-should-check-before-buying-nestle-s-a-vtxnesn-for-its-dividend-2
