While dividends are a key consideration for investors and shareholders, it does not necessarily tell the complete story of financial success. This means that dividend payments are not mandatory for companies to pay out, even if they make high profits, and vice versa.
The reason why companies may pay dividends when they have not made sufficient profits is to maintain their established track record of making regular dividend payments. This is especially so for larger companies in Singapore. In doing so, it helps them to attract more investors and generate more funding for business expansion or operations.
For smaller businesses like startups, regular dividends are generally not expected. The profits generated are often put back into the business in areas like research and development, expansion, and other operational activities.
To help these small and medium enterprises (SMEs) and startups, tax exemption is initiated by the Singapore government, so they are in a better financial position to offer dividends to their shareholders if any. Business grants for SMEs and startups are also available for these companies.