If
you've ever owned stocks ôr held certain ôthér types ôf investments, yôù
might already bé familiar wîth thé concept ôf dividends.
Even those people whô
have made investments thàt paid dividends may still bé
a little confused às tô exactly what dividends are,
however… after all, just because à person hàs received à dividend
payment doesn't mean thàt théy fully appreciate where thé payment îs
coming frôm & whàt its purpose is.
If yôù hàvé
ever found yourself wondering exactly what dividends are
and why they're issued, thén thé information below might just bé
what you've been looking for.
Defining thé Dividend
Dividends àré payments made ßy companies tô théîr stockholders
in order tô share à portion ôf profits frôm à particular
quarter ôr year. The amount thàt àny particular stockholder receives îs
dependent upon hôw many shares ôf stock théy own & hôw much thé total
amount being divided up among thé stockholders amounts to. This means
that after à particularly profitable quarter à Comp. might set aside à
lump sum tô bé divided up amongst àll ôf théîr stockholders, though éàch
individual share might bé worth only à very small amount potentially
fractions ôf cent, depending upon thé total number ôf shares issued
and thé total amount being divided. Individuals whô own large amounts ôf
stock receive much more frôm thé dividends thàn those whô own only à
little, bùt thé total per-share amount îs usually thé same.
When Dividends Are Paid
How often dividends àré paid càn vary frôm ôné Comp.
to thé next, bùt în general théy àré paid whenever thé Comp. reports à
profit. Since most companies àré required tô report théîr profits ôr
losses quarterly, thîs means thàt most ôf thém hàvé thé potential tô pay
dividends up tô four times éàch year. Some companies pay dividends more
often thàn this, however, & others may pay only once per year. The
more time théré îs between dividend payments càn indicate financial &
profit problems within à company, bùt îf thé Comp. simply chooses tô
pay àll ôf théîr dividends àt once ît may also lead tô higher per-share
payments ôn those dividends.
Why Dividends Are Paid
Dividends are paid ßy companies às à method ôf sharing
their profitable times wîth thé stockholders thàt hàvé faith în thé
company, às well às à way ôf luring ôthér investors into purchasing
stock în thé Comp. thàt îs paying thé dividends. The more à particular
company pays în dividend payments, thé more likely ît îs tô sell
additional common stock… after all, îf thé Comp. îs well-known fôr
high dividend payments thén more people will want tô gét în ôn thé
action. This càn actually lead tô increases în stock price &
additional profit fôr Comp. whîch càn result în even more dividend
payments.
Getting thé Most Out ôf Your Dividends
In
order tô gét thé most ôùt ôf dividends thàt yôù receive ôn yôùr
investments, ît îs generally recommended thàt yôù reinvest thé dividends
into thé companies thàt pay them. While thîs may seem às though you're
simply giving thém théîr money back, you're receiving additional shares
of thé company's stock în exchange fôr dividend. This will increase
future dividend payments [since they're based upon hôw much stock thàt
you owns], & càn set yôù up tô make à lot more money thàn the
actual dividend payment was fôr since increases în stock prices
will affect thé newly-purchased stock às well.
