A question from Yahoo! Answers:

Can someone explain to me how and why a company without earning can have dividends?

I was following a stock “BKD.” It has no earning and no PE ratio but it has dividends. How is that possible? and Why would they do that?

First, how. Look at the cash flow statement, and you will see that in 2005, the company sold $342 million worth of stock and increased borrowing by $259 million. This is more than enough to pay out $34 million in dividends. As to why, I really don’t know. I would guess the company is trying to conform to some unwritten industry norm…