“Many investors like dividend-paying stocks because they are looking for income. Maybe they are retired. Maybe they want to supplement other income sources. But investing for dividend income is probably not the most efficient approach—even for these types of people. Warren Buffett talks about this issue in his latest letter to the shareholders of Berkshire Hathaway. He gives a good explanation of why it’s better for investors when companies reinvest their profits in growth rather than pay out dividends. That is assuming the companies have any decently profitable investment opportunities, which is to say, almost all of the time.”
