Why Companies Continue to Pay Dividends

This article, published on the Bloomberg web site and written by University of Chicago professor Douglas J. Skinner, mentions reasons why companies continue to pay dividends when they may be better off not doing so.

http://www.bloomberg.com/news/2012-04-11/why-u-s-companies-continue-to-pay-dividends.html

One issue that Mr. Skinner does not mention:  some investors, such as trusts, require the purchase of dividend-paying stocks.  This is often the case when the trust has a "split interest" -- there are current income beneficiaries, but there are also future heirs to the trust who will receive a payout of interest, if not the entire principal, of the trust.  Current beneficiaries may be limited to receiving income distributions.  Were it not for the dividend requirement, the income beneficiary would be out of luck.  In some cases, the purchase of only dividend-paying stocks may be required by state law in which the trust calls home.  In other cases, the trust document itself may require that only income-producing assets, such as dividend-paying stocks, must be purchased.