In finance theory, as long as a company is able to grow at a rate higher than the rate at which you could reinvest your dividends, you prefer not to receive a dividend. More simply, the idea is that the money staying in the company will grow more quickly than if it&#x27;s outside of the company so long as the company is doing well.<p>Like a lot of financial theory, I think this is partly true. However, in my view, one of the side benefits of companies giving dividends is that it acts as a sort of long-term &quot;anchor&quot; to the stock&#x27;s instrinsic value: the amount the company&#x27;s stock is actually worth, which is usually wildly different from what it&#x27;s worth on the stock market.<p>Let&#x27;s say through careful analysis I find a company I think to be greatly undervalued in the stock market. I buy a bunch of shares. If they don&#x27;t pay a dividend, I&#x27;m just hoping that eventually the market will &quot;notice&quot; the discrepancy and the price will go up, but I bear a lot of risk because the opposite could happen. But, if that company pays dividends, and those dividends continue to grow, I am getting a real return which is not based on the vagaries of the market.