You might already be aware that business capital can be managed in many ways. Management can decide to reinvest earnings and grow the business. Management can decide to buy back shares so each remaining share can earn a higher proportion of profits. Management can decide to pay down debt or my personal favourite, management can decide to pay some of their earnings to shareholders in the form of dividends. I prefer the latter because as an investor dividends are not only a source of passive income but they act as an important signal about a company’s financial health – I can narrow my investment choices – companies can either afford to pay dividends for decades or they can’t.