There are a number of reasons why a corporation may choose to pass some of its earnings on as dividends, and several other reasons why it might prefer to reinvest all of its earnings back into the company.KEY TAKEAWAYSDividends are corporate earnings that companies pass on to their shareholders.Paying dividends sends a message about a company's future prospects and performance.Its willingness and ability to pay steady dividends over time provides a solid demonstration of financial strength.A company that is still growing rapidly usually won't pay dividends because it wants to invest as much as possible into further growth.Mature firms that believe they can increase value by reinvesting their earnings will choose not to pay dividends.