Dividend Payments

• Dividends are company earnings that management pays out to their stockholders. Dividends are a part of the return, in addition to gains from stock price appreciation, that investors get for investing in shares.
  
  

Raising Capital

• By cutting down on the dividends they pay their shareholders, companies can hold on to more of their earnings. This is an automatic way to raise capital since managements don't have to actively go out and raise capital. All they need to do is to cut down on dividend payments and hold on to the additional cash this generates.
  
  

Benefits

• Companies don't incur any additional costs to raise capital by cutting dividends. For instance, they don't need to pay interest to borrow money. And there is no risk that they will not be able to raise the capital, as might happen if they have to raise fresh capital through the capital markets.