What is one reason why a low-growth company might distribute dividends?

A low-growth company might choose to distribute dividends as a way to signal confidence in its long-term profitability. When a company commits to regular dividend payments, it demonstrates its financial stability and the belief that it can generate sufficient cash flow to return profits to shareholders. This action can create a perception of reliability and may help reassure investors that the company is effectively managing its operations and finances, even in the absence of rapid growth.

Distributing dividends can also serve to attract a certain type of investor—those who prefer income from dividends rather than capital gains from stock appreciation, which may be relevant to the preferences of more conservative investors. However, the primary purpose of such distributions in a low-growth environment is often to instill confidence in the company's ability to sustain its profitability over the long term. This can enhance investor sentiment and potentially stabilize the company's stock price.