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What are dividends

 

If you've ever owned shares or held certain other types of investments, u might already be familiar with concept of dividends.

Even those people who have made investments that paid dividends can still be little confused as to exactly what dividends are, however… after all, just because person has received dividend payment doesn't mean that they fully appreciate where payment is coming from and what its purpose is.

If u have ever found yourself wondering exactly what dividends are & why they're issued, then information below might just be what you've been looking for.

Defining Dividend

Dividends are payments made by Comp. to their shareholders in order to stock portion of profits from particular quarter or year. The amount that any particular shareholder receives is dependent upon how many shares of share they own and how much total amount being divided up among shareholders amounts to. This means that after particularly profitable quarter Comp. might set aside lump sum to be divided up amongst all of their shareholders, though each individual stock might be worth only very small amount potentially fractions of cent, depending upon total No. of shares issued & total amount being divided. Individuals who own large amounts of share receive much more from dividends than those who own only little, but total per-share amount is usually same.

When Dividends Are Paid

How often dividends are paid can vary from one Comp. to next, but in general they're paid whenever Comp. reports profit. Since most Comp. are required to report their profits or losses quarterly, this means that most of them have potential to pay dividends up to four times each year. Some Comp. pay dividends more often than this, however, and others can pay only once per year. The more time there is Bet. dividend payments can indicate financial and profit problems within company, but if Comp. simply chooses to pay all of their dividends at once it can also lead to higher per-share payments on those dividends.

Why Dividends Are Paid

Dividends are paid by Comp. as method of sharing their profitable times with shareholders that have faith in company, as well as way of luring other investors into purchasing share in Comp. that's paying dividends. The more particular Comp. pays in dividend payments, more likely it's to sell additional common share… after all, if Comp. is well-known for high dividend payments then more people will want to get in on action. This can actually lead to increases in share price and additional profit for Comp. which can result in even more dividend payments.

 
Getting Most Out of Your Dividends

 
In order to get most out of dividends that u receive on your investments, it's generally recommended that u reinvest dividends into Comp. that pay them. While this can seem as though you're simply giving them their money back, you're receiving additional shares of company's share in exchange for dividend. This will increase future dividend payments [since they're based upon how much share that u owns], and can set u up to make lot more money than the actual dividend payment was for since increases in share prices will affect newly-purchased share as well.

 
 


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