Lots of good answers up there! The example of Apple is a good one, and you can look at Microsoft to see a similar example with a different ending. Generally speaking, companies that retain all their earnings and reinvest in the company are looking for growth, whether it’s investing in new products, or purchasing existing products or companies. Having a huge stockpile of cash helps that growth. Microsoft used to sit on hoards of cash, but finally under pressure from investors, started to pay out a very small dividend on a quarterly basis,. Many people who hold stocks really want the companies they own to share the wealth. Additionally, many people who are closer to retirement actually depend on their quarterly dividend checks from the various stocks they own as part of the income they live on.
Some people (like me) don’t really care about the dividend as long as the company has good growth potential. I’m a while from retirement, so the income aspect of investing in stock isn’t that important to me. Those stocks I have that DO pay dividends, I usually enroll in dividend reinvestment, which is a program that many companies offer whereby your quarterly dividend is used to buy more shares, rather than paid out in cash. This helps build your investment.
One more thing to note also about dividends (and it was the comment from @plethora above that made me think of this). The value of a dividend is not in how much a shareholder receives per share, but what the dividend is in relation to the stock’s price. For example, Company A and Company B both have a 50 cent dividend. Company A sells for $25 per share, and Company B sells for $50 per share. What this means is, Company A has an 8% dividend yield ($2 per year divided by the stock price), and Company B has a 4% dividend yield. That means if you’re looking for INCOME, then Company A may be a better investment. If you’re looking for growth, or don’t care whether your return comes from capital appreciation or dividends, then you need to look closely at both companies and determine for yourself which is the better investment.