The proportion of firms paying cash dividends falls from 66.5% in 1978 to 20.8% in 1999, due in part to the changing characteristics of publicly traded firms. Fed by new listings, the population of publicly traded firms tilts increasingly toward small firms with low profitability and strong growth opportunities – characteristics typical of firms that have never paid dividends. More interesting, we also show that regardless of their characteristics, firms have become less likely to pay dividends. This lower propensity to pay is at least as important as changing characteristics in the declining incidence of dividend-paying firms.