Dividends are a portion of a company’s profit distributed among its shareholders. When a company earns a profit, it can choose to reinvest it into the business for further growth or to distribute a portion of this profit to its shareholders in the form of dividends.
Paying dividends is a way to reward shareholders for their investment in the company. Dividends are typically paid in cash, but they can sometimes be paid in the form of additional shares or other assets.
The amount of dividends and the frequency of their payment depend on the company’s policy. Some companies pay dividends regularly (e.g., quarterly), while others may pay them less frequently or not at all, preferring to reinvest the profits.
Key points to know about dividends:
Dividend Yield: This is a measure that shows the ratio of the annual dividend to the current market price of the stock. It is used to assess the profitability of investing in the stock.
Record Date: This is the date on which the company determines which shareholders are entitled to receive dividends.
Payment Date: This is the date when the dividends are actually paid out to shareholders.
Ex-Dividend Date: This is the date after which a buyer of the stock is no longer entitled to receive the next dividend. It usually occurs a few days before the record date.
