The single most significant reason for an investor to hold a stock that pays no dividends is that favorable tax implications are associated with appreciation in value and capital gains.

Question

Quizplus · Accepted Answer

When a stock pays no dividends, the investor can avoid immediate taxation on the profits earned in the form of dividend income. Instead, the investor can potentially benefit from favorable tax treatment on any capital gains when they sell the stock at a higher price than they bought it for. Capital gains taxes are generally lower than ordinary income tax rates, and they are only realized when the investor sells the stock, meaning they can potentially defer taxation for a longer period of time.

The Single Most Significant Reason for an Investor to Hold